Combined, Albertsons Cos. and Kroger currently employ 710,000 associates and operate 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies and 2,015 fuel centers. The companies say the merger creates "a premier seamless ecosystem across 48 states and the District of Columbia, providing customers with a best-in-class shopping experience across both stores and digital channels."
Financial Aspects of Kroger-Albertsons MergerThe combined company will drive profitable growth and sustainable value for all stakeholders, according to the press release. The merger agreement was unanimously approved by the board of directors of each company. Under the deal, Kroger will acquire all of the outstanding shares of Albertsons Cos. common and preferred stock (on an as converted basis) for an estimated total consideration of $34.10 per share. According to the release, this implys a total enterprise value of approximately $24.6 billion, including the assumption of approximately $4.7 billion of Albertsons Cos. net debt. Additional financial details are outlinedhere.
U.S. Senate will examine the merger dealOn October 18, U.S. Senators Amy Klobuchar (D-MN) and Mike Lee (R-UT), Chairwoman and Ranking Member of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights,announcedthey will hold a hearing in November to examine the proposed merger between Kroger and Albertsons, which are the two largest grocery chains in the country.
“As the Chair and Ranking Member of the Subcommittee on Competition Policy, Antitrust, and Consumer Rights, we have serious concerns about the proposed transaction between Kroger and Albertsons," Senators Klobuchar and Lee said. "The grocery industry is essential, and we must ensure that it remains competitive so that American families can afford to put food on the table. We will hold a hearing focused on this proposed merger and the consequences consumers may face if this deal moves forward.”
AsCNN reported, Senators Bernie Sanders (D-VT) and Elizabeth Warren (D-MA) also spoke out against the deal. Sen. Warren called on the Federal Trade Commission (FTC) to block the deal and tweeted: “More mergers and less competition would mean even higher prices—and layoffs for employees."
Jay Jacobowitz, President and Founder of Retail Insights, shared his thoughts on the Senators' concerns, noting, "It would have been surprising had congenitally anti-business Senators Sanders and Warren remained silent on the proposed merger. Count me skeptical these lifelong politicos—who've never had the pressure of meeting a payroll or managing a business, much less one with sub-two-percent net profit margins—understand the necessity of maintaining competitive parity. With Aldi, Amazon, Costco, Dollar General, and Target all in growth mode, the fallacy of market dominance is glaringly clear. This is government rent-seeking at its worst."
Kroger, Albertsons CEOs Discuss the Deal"We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders," said Rodney McMullen, Kroger Chairman and Chief Executive Officer, in the October 14 release. McMullen will continue serving as Chairman and CEO of the combined company.
"Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores," McMullen continued. "This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors. As a combined entity, we will be better positioned to advance Kroger's successful go-to-market strategy by providing an incredible seamless shopping experience, expanding Our Brands portfolio, and delivering personalized value and savings. We'll also be able to further enhance technology and innovation, promote healthier lifestyles, extend our health care and pharmacy network and grow our alternative profit businesses. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders."Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. Kroger has a track record of successful integrations that combine the strengths of each company while maintaining and enhancing each organizations' distinctive banners and storied histories. As a combined company, we will build on our similar values to create a culture that embraces diversity, equity and inclusion and fosters a best-in-class associate experience by enabling, supporting and empowering our associates to unlock their full potential. Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates."
Vivek Sankaran, CEO of Albertsons Cos., noted: "We have been on a transformational journey to evolve Albertsons Cos. into a modern and efficient omnichannel food and drug retailer focused on building deep and lasting relationships with our customers and communities. I am proud of what our 290,000 associates have accomplished, delivering top-tier performance while furthering our purpose to bring people together around the joys of food and to inspire well-being. Today's announcement is a testament to their success. At Albertsons Cos., we are guided by an ambition to create customers for life. Together with Kroger, our combined iconic banners will be able to provide customers with even more value and greater access to fresh food and essential pharmacy services. Given the similarities in the culture and values at Kroger and Albertsons Cos., I am confident that the combination will also have a positive impact on our associates and the communities we are proud to serve. We look forward to working together with Kroger to capture the compelling opportunities ahead."