In a bid to stitch up federal approval for their merger, Kroger and Albertsons have announced a deal to sell off an expanded number of stores, including an increase of the count previously on the table in Illinois. The two grocery giants are now proposing to sell a total of 579 stores to C&S Wholesale Grocers, with 35 of those stores located in Illinois, as reported by NBC Chicago. This move represents a beefed-up effort to meet regulatory demands as they face formidable resistance from the Federal Trade Commission (FTC).
The decision includes divestitures from the Mariano’s brand, among others, and is a step up from a September announcement that originally planned for fewer stores, around 14, to be sold. "We have reached an agreement with C&S for an updated divestiture package that maintains Kroger's commitments to customers, associates and communities, addresses concerns raised by regulators, and will further ensure that C&S can successfully operate the divested stores as they are operated today," told NBC Chicago by Rodney McMullen, Kroger's Chairman, and CEO. Making clear the companies' intentions to push the merger through, these added measures come as both chains face legal pushback aimed at blocking the colossal $24.6 billion deal.
While Kroger and Albertsons strive to paint a rosy picture of a merger that they argue could better stand up against the market influence of giants like Walmart, Amazon, and Costco, the FTC, along with a group of state attorneys general, have raised the red flag. Illinois is among eight states that have thrown in with the FTC to call the deal off, citing concerns about escalating prices and potentially disadvantaged workers in an industry already marked by stiff competition and slim margins. According to a suit filed by the FTC, which was also echoed in a federal court action, these concerns are not baseless - the proposed merger could result in less competition leading to higher prices for millions of Americans.
Rebuttal statements from the supermarket chains underscore their persistence. While navigating through regulatory hurdles, Kroger and Albertsons argue that the merger is a means to safeguard their competitiveness. "Albertsons Cos.' merger with Kroger will ensure our neighborhood supermarkets can better compete with these mega-retailers, all while benefitting our customers, associates, and communities," Albertsons said in a statement obtained by NBC Chicago. Even as they face scrutiny and the potential for a significant impact on their operations, the chains convey confidence that no stores will close and collective bargaining agreements will stay intact.
The updated proposal encompasses far-reaching changes for the companies, with Kroger even offering to sell its Haggen banner to C&S, a move that allows C&S to take up the Albertsons banner in select states, including licensing the Safeway banner in Arizona and Colorado. "We are confident this expanded divestiture package will provide the stores, supporting assets and expert operators needed to ensure these stores continue to successfully serve their communities for many generations to come," Eric Winn, C&S CEO, stated in an announcement covered by the Chicago Tribune. Despite the grocery chains' planned investments and assertions of a steady course, the FTC's skepticism and the ongoing legal clash suggest that the road to merger approval could be a long slog ahead.
