Kroger-Albertsons Merger Faces Long Road Before Approval (2023)


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Consumer advocates, unions and independent grocers are against a deal that would join Kroger and Albertsons, and be lucrative for investors.

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Kroger-Albertsons Merger Faces Long Road Before Approval (1)
(Video) Kroger, Albertsons stocks down amid news of $24.6 billion merger

By Julie Creswell

Ever since the pending megamerger between Kroger and Albertsons, the two largest grocery store chains in the country, was announced in October, the companies have argued that the marriage will be good for consumers, employees and communities.

But the biggest winners in the $24.6 billion deal may be the private-equity giant Cerberus and a group of investors. They have already made big profits in their long-term investment in Albertsons and hope to make billions of dollars more through the merger.

The buyout group was a step closer to a big payday last week when the Washington State Supreme Court declined to review a case brought by the state attorney general that tried to stop a dividend payment to Albertsons’ shareholders, arguing that it would financially weaken the company if the transaction failed.

The decision clears the way for Albertsons to pay its shareholders a $4 billion dividend. The buyout group, which owns 73 percent of the company, will receive the biggest share of the dividend, or $3 billion, of which $2.5 billion will come from cash and about $1.5 billion will be borrowed and put on Albertsons’ balance sheet. Albertsons said it would immediately begin the process of paying the special dividend.

The legal challenge to the dividend was the first in what is likely to be a long and arduous process for Kroger and Albertsons, and theirplanto create a behemoth with $200 billion in annual revenues and 5,000 stores across the countryoperating under well-known chains like Safeway, Ralphs and Vons.

The companies have said regulatory approval for the complicatedtransactionwon’t happen until early next year and may require the sale or spinoff of hundreds of grocery stores. Washington Analysis, a research firm in Washington, D.C., that focuses on political and regulatory policy, put the odds of the merger successfully closing at 35 percent.


(Video) How Kroger-Albertsons merger could affect Coloradans

At a time when consumers are already withering under high food prices, consumer advocates argue that the deal would wipe out any meaningful competition in numerous cities and communities and ultimately lead to consumers paying more.

Union officials have attacked the deal, saying it puts jobs at risk as antitrust regulators will probably force the sale of hundreds of grocery stores across the country.

“Is my store going to be one that closes? Is my livelihood going to go away?” asked Kyong Barry, 60, a front-end manager at a Safeway in Auburn, Wash. She is a member of the United Food and Commercial Workers International Union, which has 350,000 members working in stores owned by Kroger and Albertsons.

For the past 15 of her 20 years working at the grocery store, Ms. Barry said, she had perfect attendance before a bout of Covid-19 just before Thanksgiving forced her to call out sick. “This is a very scary time for us while they try to pay themselves $4 billion that we helped them make,” she said.

And even independent grocery store chains are fretting about the merger, saying it will result in higher food prices and make the already competitive landscape more difficult.

“When the large power buyers demand full orders, on time and at the lowest cost, it effectively causes the water-bed effect,” said Michael Needler Jr., the president and chief executive of Fresh Encounter, a chain of 98 grocery stores based in Findlay, Ohio. “They push down, and the consumer packaged goods companies have no option but to supply them at their demands, leaving rural stores with higher costs and less availability to products.”


(Video) Kroger, Albertsons merger would leave some Colorado towns with only 1 grocer

The two grocery store chains and investment firms involved insist the deal isn’t about a payday for investors.

“Our merger with Albertsons provides meaningful, measurable benefits to America’s consumers, associates of both companies and the communities we serve,” Kroger said in a statement.

Albertsons said in a statement that it had “grown tremendously with the help of our sponsors and other investors.” It added that it had spent billions of dollars to modernize its stores and build digital and technology platforms, as well as to improve associate wages, benefits and training programs.

For the private-equity giant Cerberus, which was co-founded by the billionaire Stephen Feinberg and oversees $60 billion in assets, getting into the grocery business was relatively easy. Getting out has proved much more difficult.

For years, the grocery store industry had low growth yet was intensely competitive, with Walmart, Target, Costco and others increasingly elbowing their way into food shoppers’ carts. As grocery chains struggled to compete against the big-box behemoths, consolidation happened and private-equity firms moved in, sometimes with disastrous results.

Corporate buyout specialists generally raise money from big investors, like pension funds for state employees, teachers, police officers and firefighters, and then buy undervalued or underappreciated companies. To maximize investment returns, the buyout firms typically leverage their cash with loans that are taken out by the company itself.

For most buyout funds, the hope is to fix or improve the company and make profits in a public offering or by selling the company to another buyer within four to seven years. In other instances, the debt piled on the company for the buyout overwhelms it, as was the case in 2016 and again in 2020 when the New York grocery chain Fairway Markets filed for bankruptcy.

Cerberus moved into the grocery business 17 years ago when it acquired 655 struggling stores owned by Albertsons sprinkled around Florida, Texas and Northern California for $350 million in equity. In 2013, the investors put up $100 million in cash and took out $3.2 billion of debt to acquire more than 800 stores from Supervalu. About a year later, more stores were added when the group contributed $1.25 billion to acquire more than 1,300 stores from Safeway. The rest of the $9 billion purchase of the Safeway stores was financed with debt, pushing Albertsons’ total debt to more than $12 billion.

“Our story with Albertsons is one of a long-term partnership that has created thousands of union careers and invested billions into stores, infrastructure and local communities,” Cerberus said in a statement. “It has also supported the retirement savings of individuals, universities, nonprofits and others who have entrusted us as a fiduciary.”

But various efforts by the investors to find a lucrative way to cash out of the grocery store business have been thwarted several times as Albertsons has struggled with net losses for several years.

In 2017, when Albertsons turned a small profit, the investment firms paid themselves a cash distribution of $250 million.

Later, an attempt in 2018 to cash out of the investment fell through when a proposed reverse merger with Rite Aid was scuttled after the drugstore chain’s shareholders opposed it.

(Video) Grocery merger could impact prices, jobs


Albertsons went public in the early months of the pandemic, but its offering was lackluster. Still, the investors sold $800 million worth of shares, andanother $1.7 billion was raised from some hedge funds and used to do a share buyback.

But for Albertsons, the pandemic significantly changed its fortunes. As consumers worked from home and ate fewer meals at restaurants, grocery store profits soared. Albertsons’ profits nearly quadrupled to $1.6 billion in 2021 from $466 million in 2019.

The higher profits allowed Albertsons to pay its shareholders nearly $500 million in dividends over the past three years.

The sky-high profits also attracted a suitor. In early 2022, a grocery store chain identified as Party A in securities filings emerged with an offer to buy Albertsons for $41 a share. But as the potential buyer was going through due diligence and shortly after Albertsons’ financial advisers raised the idea of a multi-billion-dollar dividend payout to shareholders, the buyer walked away.

After a scramble to look for alternatives, another buyer was found. In October, Kroger announced it would acquireAlbertsons in a complex deal that would pay all shareholders $34.10 a share. But that value will decrease by $6.85 a share when the $4 billion dividend to all shareholders is paid and could decline further if, in order to receive regulatory approval, hundreds of stores are placed in a new company that would be owned by Albertsons shareholders, including the private-equity firms.

“That’s where the most uncertainty lies — how many stores will they have to divest?” said Arun Sundaram, an equity analyst at CFRA Research. “That could be another $4 a share, which means, at the end of the day, if the deal goes forward, shareholders could receive $23 a share by our estimate.”

For the buyout firms and other investors, which had about $2 billion invested in total in the various grocery store acquisitions, their 73 percent stake in Albertsons would be valued at more than $9 billion. That is on top of the $1.5 billion in profits they’ve already made and the $3 billion from their share of the dividend when it is paid.

“The returns will ultimately be pretty good and probably beat the stock market” over the length of the investment, said Jeffrey Hooke, a former investment banker and author of the book “The Myth of Private Equity,” who is now a finance lecturer at Johns Hopkins Carey Business School. “But the Albertsons shareholders have been hanging on to this company, or its predecessor, for almost 17 years, and that’s a very long holding period for private equity firms. It’s only natural for them to want to seek an exit.”


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(Video) Kroger to merge with Albertsons after $20B bid


Is Albertsons and Kroger owned by the same company? ›

Kroger announced in October that it would merge with Albertsons Companies, Inc. in a nearly $25 billion deal that is aimed at making the company more competitive with other giants like Walmart and Costco.

Is Kroger trying to buy Albertsons? ›

The transaction is expected to advance Kroger's strategy of Leading with Fresh, Accelerating with Digital and will enable the combined company to build on Kroger's go-to-market strategy that includes Fresh, Our Brands, Personalization and Seamless. Kroger looks forward to bringing the best of Albertsons Cos.

When did Tom Thumb join Albertsons? ›

In January 2015, Safeway Inc. was acquired by Albertsons, and Tom Thumb (but not Randalls) was re-aligned under the Albertsons Southern Division. By this time, it had 57 stores operating under the Tom Thumb name.

Are Albertsons and Fred Meyer the same? ›

Kroger owns Portland-based Fred Meyer and the QFC chain. Albertsons operates stores under its name and owns the Safeway chain, too. Together, the two companies have an enormous footprint in the Northwest.

Has the Kroger Albertsons merger been approved? ›

As previously reported, Kroger and Albertsons have agreed to combine in $24.6 billion deal that is expected to close in early 2024.

What does the Kroger Albertsons merger mean? ›

According to experts, the Kroger-Albertsons deal will bring a great deal of focus to retail media, and the new combined entity might even be able to challenge Walmart, the second biggest player in the retail media space, by offering brands a more compelling ad offering and a greater breadth of data that can be used to ...

Who is bigger Kroger or Albertsons? ›

Albertsons is the second-largest supermarket company, owning 2,300 stores and employing 290,000 people. Kroger is the largest supermarket operator in the U.S., with more than 2,700 stores and 450,000 employees and owns other supermarket chains like Harris Teeter, Fred Meyer and Ralphs.

Will Albertsons change its name? ›

in 2015. The company's corporate name was Albertson's Inc. until 2002, when the apostrophe was removed. On October 14, 2022, Kroger announced it would be acquiring Albertsons for $25 billion.
FormerlyAlbertson's Inc. (until 2006 sale to Supervalu, Cerberus)
Number of locations2,253 (December 5, 2020)
19 more rows

Is the Kroger Albertsons merger final? ›

“We will continue to work cooperatively with the Federal Trade Commission as it conducts its review of the merger, including developing a thoughtful divestiture plan. Kroger continues to expect to complete the merger in early 2024.”

Is Albertsons owned by Mormons? ›

Albertsons is not owned by the Mormon Church. The Church of Jesus Christ of Latter-day Saints does not own any grocery store and is not listed among the top shareholders of the company. Albertsons is owned by the private equity firm Cerberus Capital Management.

Will Tom Thumb become Kroger? ›

Together, the four brands operate 195 stores in Dallas-Fort Worth. The mega-merger of Kroger and Albertsons forms a huge national competitor almost the size of Walmart, but in Dallas-Fort Worth it means Kroger will buy Albertsons, Tom Thumb and Market Street in one fell swoop.

Who is the parent company of Albertsons? ›


Is Albertsons being bought out? ›

In a mega-deal that could create a grocery behemoth, Kroger announced Friday plans to acquire rival Albertsons. The $24.6 billion deal, if approved by regulators, would unite two of the country's largest grocers to create a supermarket giant with nearly 5,000 stores and annual revenue of about $200 billion.

Is Albertsons better than Kroger? ›

Albertsons Companies's brand is ranked #197 in the list of Global Top 1000 Brands, as rated by customers of Albertsons Companies. Kroger's brand is ranked #151 in the list of Global Top 1000 Brands, as rated by customers of Kroger. Their current market cap is $27.03B.
Albertsons Companies vs Kroger.
1 more row

Can I use my Kroger card at Fred Meyer? ›

The Kroger Family of Companies Gift Card represents a prepayment for goods and fuel available at Kroger, Barclay Jewelers, Baker's, City Market, Copps, Dillons, Food 4 Less, Foods Co., Fred Meyer, Fred Meyer Jewelers, Fry's Food and Drug, Gerbes, JayC, King Soopers, Littman Jewelers, Mariano's, Metro Market, Owen's, ...

Is there a lawsuit against Kroger? ›

Kroger workers filed a class-action lawsuit against the company, claiming the grocery chain garnished paychecks and failed to pay wages after it implemented a new payroll system in 2022.

What is the lawsuit against Kroger? ›

On Thursday, January 19, 2023, a group of Kroger associates in the Mid-Atlantic region filed the class action lawsuit in federal court in Richmond, Virginia. The lawsuit is alleging their employer was engaging in “widespread wage theft resulting from repeated and ongoing problems with payroll”.

Is Kroger changing their name? ›

A day after it met with investors in New York, Kroger unveils a new logo and tagline. The company says it will keep the names of its local banners, like Ralphs, but wants a universal slogan to tie everything together.

What happens if you own a stock that merges? ›

Whatever the exchange ratio in a stock-for-stock merger, shareholders of both companies will have a stake in the new one. Shareholders whose shares are not exchanged will find their control of the larger company diluted by the issuance of new shares to the other company's shareholders.

What happens to stock price after merger? ›

The target company's stock price usually rises due to the deal; an acquiring company pays a premium on the target shares to win the appreciation of the target company's shareholders. Thus, with the premium paid, the selling company stocks get higher and can attract more potential investors.

Who is the largest shareholder of Kroger? ›

The Vanguard Group, Inc.

What is the number 1 grocery store in America? ›


Which grocery store is the richest? ›

The largest food retailer in the world is Walmart, with a revenue of $559.151 billion and a net income of $14.88 billion.
A few major strategies the company employs towards this end include:
  • Bulk purchasing and lower variety of inventory. ...
  • Food court. ...
  • Membership benefits.
Jul 26, 2022

Is Piggly Wiggly owned by Kroger? ›

Despite their history, Kroger does not own these supermarkets. Piggly Wiggly operates on a franchise system, and independent operators own each store. Kroger is only part of the franchise, having acquired Piggly Wiggly stores in Memphis back in the 1920s.

Is Albertsons in financial trouble? ›

Based on the latest financial disclosure, Albertsons Companies has a Probability Of Bankruptcy of 33.0%. This is 8.79% lower than that of the Consumer Defensive sector and 23.88% lower than that of the Grocery Stores industry.

Is Albertsons more expensive than Kroger? ›

Albertsons stores are concentrated more on the West Coast, while Kroger is dominant in the Midwest. Albertsons has higher prices than Kroger and other grocers, analysts say, and they predict Kroger will try to reduce Albertsons prices to be more competitive against discount chains like Aldi.

Will Kroger keep the Albertsons name? ›

Kroger says it would reinvest $500 million into price reductions, spend $1.3 billion updating Albertsons stores and $1 billion on higher employee wages and improved benefits. One thing will likely remain the same: customers will still see the Acme name. If the merger is approved, changes will happen in 2024.

Did Kroger buy Albertsons and Safeway? ›

Originally Published: October 15, 2022 5:45 p.m.

Who is the parent company of Kroger? ›

Institutional Ownership

The Vanguard Group, Inc.

What company owns Albertsons? ›


What company is owned by Kroger? ›

The Kroger Co. operates grocery retail stores under the following banners: Supermarkets – Kroger, Ralphs, Dillons, Smith's, King Soopers, Fry's, QFC, City Market, Owen's, Jay C, Pay Less, Baker's, Gerbes, Harris Teeter, Pick 'n Save, Metro Market, Mariano's.

Will Kroger merger go through? ›

Kroger continues to expect to complete the merger in early 2024.” The FTC's second request comes a week after Kroger Chairman and CEO Rodney McMullen and Albertsons Cos.

What did Kroger used to be called? ›

Kroger Co., formerly (1883–1902) Great Western Tea Company and (1902–46) Kroger Grocery and Baking Co., American chain of supermarkets and related retail businesses. In the early 21st century, Kroger was the world's third largest retailer and the largest chain of freestanding supermarkets in the United States.


1. Kroger Said to Be in Talks to Buy Rival Albertsons
(Bloomberg Markets and Finance)
2. Senators raise concerns over Kroger-Albertsons merger
(Yahoo Finance)
3. US lawmakers skeptical Kroger-Albertsons merger will mean lower prices
4. Kroger, Albertsons announce definitive merger agreement
5. Kroger, Albertsons leaders believe merger will reduce prices for consumers, experts aren't so sure
(FOX 4 Dallas-Fort Worth)
6. Closer look at questions Kroger will face amid acquisition of Albertsons
(WCPO 9)
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