Kroger and Albertsons are set to divest more than 400 stores, with 66 of them located in California. The divestiture, estimated at $1.9 billion, aims to remove regulatory obstacles to the $25 billion merger between the two supermarket giants.
The 413 stores, along with the QFC, Mariano’s, and Carrs brand names, will be sold to C&S Wholesale Grocers. Additionally, Kroger will divest its private label brands, including Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals, and Waterfront Bistro. C&S will also acquire eight distribution centers and two offices.
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All fuel centers and pharmacies associated with the divested stores will remain operational.
Kroger’s bid of $20 billion for Albertsons, based in Cincinnati, Ohio, was made in October. Under the terms of the deal, Kroger will also take on $4.7 billion of Albertsons’ debt. The merger is expected to close in early 2024.
The merger between Kroger and Albertsons is seen as a necessary move to compete with dominant players like Walmart and Amazon, who have made significant inroads into the grocery industry. The grocery sector has witnessed widespread consolidation due to escalating costs, from food to labor.
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Aldi, a discount grocer, recently announced its plans to acquire 400 Winn-Dixie and Harveys supermarkets in the southern U.S.
Prior to the completion of the deal with C&S and to secure regulatory clearance from the Federal Trade Commission and other governmental bodies, Kroger may require C&S to purchase up to an additional 237 stores in specific regions. If more stores are included in the agreement, C&S will make an additional financial payment that is yet to be determined.
C&S, founded in 1918, is a supplier to independent grocery stores, serving over 7,500 independent supermarkets, retail chain stores, and military bases. The company currently operates Grand Union grocery stores and Piggly Wiggly franchise and corporate-owned stores in the Midwest and Carolinas. C&S has previous experience in divestitures related to mergers and has successfully managed the transition of union employees and their collective bargaining agreements in the past.
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“Importantly in our agreement, C&S commits to honoring all collective bargaining agreements which include industry-leading benefits, retaining frontline associates and further investing for growth,” stated Kroger Chairman and CEO Rodney McMullen on Friday. Following the news, shares of Kroger Co., headquartered in Ohio, rose 5%, while Albertsons Cos., based in Idaho, rose 3%.
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