Kroger Co (NYSE: KR) moves down 1.78% to $42.44 in early trading session on Monday the firm paid $25 billion for Albertsons Cos Inc, establishing a U.S. supermarket juggernaut that will be able to fight on price with leader Walmart Inc. while avoiding any antitrust hurdles.
The mega-merger of the United States’ No. 1 and No. 2 freestanding grocers will unite roughly 5,000 shops under one roof, including Albertsons’ Safeway and Kroger-owned Ralphs and Fred Meyer.
According to three antitrust experts, the US Federal Trade Commission (FTC) might contest the transaction between the two large supermarkets as antitrust monitoring rises under the Biden administration and decades-high inflation squeezes people.
“A high risk of a challenge exists,” said Andre Barlow of Doyle Barlow and Mazard PLLC. “This is the sort of transaction that the FTC wishes to discourage.” To assuage such fears, the firms announced plans to divest certain shops, and Albertsons is ready to spin out a separate unit to its shareholders shortly before the deal’s conclusion, which is due in early 2024. The new public firm is expected to have up to 375 shops.
“We have a clear route to secure regulatory approval with divestitures,” business officials told investors on a conference call on Friday, adding that it was still too early to pinpoint which markets will be affected by the reorganization.
The US FTC, according to Barlow, would still have concerns about who would administer the stores and whether they would have enough assets and purchasing power to compete successfully. Nonetheless, several experts were confident that the strategy to sell outlets would suffice.
GlobalData Retail’s managing director, Neil Saunders, stated “These are largely local issues where a merger results in a very high market share in specific locations. A merged Kroger and Albertsons does not constitute a significant threat to the market’s competitive dynamics on a national scale.”
Kroger CEO McMullen, who would lead the merged company, told Reuters that they approached Albertsons a few months ago, after the smaller competitor launched a strategic review process early this year.
