Kroger and Albertsons plan merger to combine 2 largest supermarket chains

Kroger plans to buy Albertsons in a deal valued at $24.6 billion, a merger that would combine the two largest supermarket chains in the United States, the companies said Friday.

The deal is likely to draw intense scrutiny from federal regulators and critics as it would form a new supermarket colossus at a time of rising food costs. Grocery prices rose 13% in September compared to a year ago.

Kroger is the largest supermarket operator in the US, with 420,000 employees and more than 2,700 stores, including Ralphs, Harris Teeter, Fred Meyer and King Soopers. Albertsons is the second largest supermarket company in the country, with 290,000 employees and nearly 2,300 stores, including Safeway and Vons.

The two overlap in various markets, mainly in the western part of the country. Their merger would mean spinning off as many as 375 stores into a separate company, the companies said.

In Friday’s announcement, Kroger said it would “reinvest approximately $500 million in cost savings from synergies to lower prices for customers” and invest $1 billion to increase worker wages and benefits.

For both companies, Walmart is a key competitor, as it is a national department store giant that sells more groceries than Kroger and Albertsons combined. The two also face competition from Costco and Amazon, with their online delivery reach, and most recently, dollar stores, the fastest-growing retail segment in the US.

Biden administration antitrust regulators have defended changes in the government’s approach to mergers, and have pushed against megadeals, citing an outsized impact on competition and consumer prices.

Kroger and Albertsons “will be looking much more closely than previous transactions received in this sector,” said William Kovacic, a former attorney and chairman of the Federal Trade Commission. “They’re going to face a lot more skepticism about the potential benefits of consolidation,”

But federal competition regulators have also recently lost in litigation over some attempts to block mergers, said Kovacic, who is now a law professor at George Washington University.

“So it’s probably going to be a difficult step through the review by the FTC,” he said. “It does not mean that the FTC is absolutely destined to prevail if it decides to go to court and challenge the settlement.”

For many years, Kroger, Albertsons, and Safeway were the leading independent supermarket chains, prominent in different parts of the country. Albertsons merged with Safeway in 2015, then tried unsuccessfully to merge with the Rite Aid pharmacy chain in 2018, and finally went public in 2020.

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