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To Make Merger More Palatable, Kroger and Albertsons Boost Store Divestment Count

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Facing regulatory challenges to their proposed $24.6 billion merger, Kroger and Albertsons have increased the number of supermarkets they plan to divest by 166, for a total of 579 stores. The retailers also have increased the corporate and office infrastructure they would sell to C&S Wholesale Grocers, as well as additional private label product lines, for a total of approximately $2.9 billion in cash — nearly 50% more than the $1.9 billion price tag of the previous package.

Under the original divestiture plan announced in September 2023, Kroger and Albertsons said they would sell 413 stores and eight distribution centers to C&S, but apparently this wasn’t enough to satisfy the Federal Trade Commission (FTC), which formally challenged the merger in February 2024.

The updated plan also seeks to address unions’ concerns about the merger’s impact, including the United Food and Commercial Workers International Union, which voted to oppose the merger in May 2023. In a statement, Kroger CEO and Chairman Rodney McMullen said, “Importantly, the updated divestiture plan continues to ensure no stores will close as a result of the merger and that all frontline associates will remain employed, all existing collective bargaining agreements will continue, and associates will continue to receive industry-leading health care and pension benefits alongside bargained-for wages.”

The revised plan maintains the sale to C&S of the QFC, Mariano’s and Carrs banners and adds the Haggen banner. Stores currently under those banners that are retained by Kroger will be re-bannered into one of the retained Kroger or Albertsons chains. In connection with the additional stores, C&S also will get increased distribution capacity through a combination of different and larger facilities, expanded transition services agreements and the addition of a dairy facility. Additionally, C&S will gain access to the Signature and O Organics private label brands, which will join the Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro brands.

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