Two of the nation’s largest grocers have agreed to merge in a deal they say would help them better compete with Walmart, Amazon and other major companies that have stepped into the grocery business.
Kroger on Friday bid $20 billion for Albertsons Companies Inc., or $34.10 per share. Kroger will also assume $4.7 billion of Albertsons’ debt.
Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like Ralphs, Smith’s and Harris Teeter. Alberstons, based in Boise, Idaho, operates 2,220 stores in 34 states, including brands like Safeway, Jewel Osco and Shaw’s. Together the companies employ around 710,000 people.
The deal will likely get heavy scrutiny from U.S. antitrust regulators, especially at a time of high food price inflation. If approved, the deal is expected to close in early 2024.
Together, the stores would control around 13% of the U.S. grocery market, assuming the sale or closure of around 400 stores for antitrust reasons, according to J.P. Morgan analyst Ken Goldman.
Still, that is a distant second to Walmart’s 22% share. Amazon, which bought Whole Foods in 2017, is also a growing player in the space, with 3% share. Warehouse store Costco controls 6%.
Goldman said a stronger combined company could possibly help tame food price inflation, since it would have more power to reject food producers’ price increases.
Kroger said would reinvest approximately $500 million into price reductions, and spend $1.3 billion updating Albertsons stores and $1 billion on higher employee wages and improved benefits.
But critics questioned a merger at a time of high food price inflation. Food prices rose 13% in September compared with last year, according to U.S. data released Thursday.
“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, a nonprofit that supports stronger corporate accountability and antitrust measures.