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Kroger Buys Albertsons for $24.6 Billion


Kroger Grocery Store | Image by Shutterstock

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Kroger and Albertsons have joined forces in an effort to compete against Walmart, which dominates a quarter of the grocery business.

On Friday, Kroger announced its intention to purchase Albertsons at $34.10 per share and assumed $4.7 billion dollars of Albertsons’ debt. In total, the merger will cost Kroger $24.6 billion dollars.

Currently, Walmart receives 25.2% of all grocery sales. Kroger is the second largest grocer receiving 8.1%, while Albertsons ranks fourth with 4.8% of grocery sales. Combined, Albertsons and Kroger will hold just under 13% of the market.

CEO Rodney McMullen of Kroger claims the acquisition of Albertsons will benefit consumers by eliminating redundancies in administrative staffing and streamlining transportation costs.

“We will take the learnings from each company to bring greater value and a better experience to more customers, more associates, and more communities,” McMullen said, relaying his excitement Friday in a conference with investors.

J.P. Morgan analyst Ken Goldman agrees with McMullen’s analysis and claims that the combined company could help lower the price of food and pass on the savings to consumers.

On the other hand, some oppose the effort for fear that a big grocery conglomerate would discourage healthy market competition and drive up prices for consumers.

“A Kroger-Albertsons deal would squeeze consumers already struggling to afford food, crush workers fighting for fair wages and destroy independent, community stores,” said Sarah Miller, executive director of the American Economic Liberties Project.

Likewise, the deal is expected to receive scrutiny from antitrust regulators. The justice department is currently updating merger guidelines after President Joe Biden signed an executive order barring monopolies and anti-competitive deals.

The merger will have a huge impact on the Dallas-Fort Worth area, where together, Kroger and Albertsons have 195 stores. Combined, they dominate the market and claim a 28% larger share than Walmart.

Moreover, many Albertsons (and Albertsons-owned storefronts such as Tom Thumb) operate fairly close to Kroger locations in the DFW area. Kroger has yet to disclose whether some stores will be closing or laying off employees, but closing competitive storefronts during large mergers is not uncommon.

Other potential consumer concerns have yet to be addressed by the DFW grocers. For instance, it is unclear how the merger may affect the use of the Kroger Fuel Rewards card, or whether stores will allow for the transfer of prescriptions between pharmacies.

As of yet, it is also unknown whether stores will carry both companies’ generic brands. However, Kroger noted plans to further invest in its Private Selection brand, which raked in $28 billion dollars for the company. McMullen hopes the Kroger Private Selection products will differentiate Kroger from Walmart and give the company an edge.

If the merger withstands the scrutiny of regulators, it is expected to be completed by 2024.

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