Merged companies may divest 650 stores

ALAMOSA — Last October, the largest two supermarket chains in the country, Kroger and Albertsons announced a $24.6 billion deal to merge the two companies. Kroger, with a large portfolio of supermarket names, owns City Market, and proposed merging with Albertsons, owner of the Safeway brand. Both City Market and Safeway have stores in Alamosa.

The proposed merger would create a mega-conglomerate with annual revenue of about $210 billion, almost 5,000 stores, 66 distribution centers, and 710,000 employees. The mega-merger company has piqued the interest of the Federal Trade Commission which has sent Kroger two requests for information.

Last November, Rodney McMullen, chairman and CEO of Kroger, and Vivek Sankaran, CEO of Albertsons went before a Senate Judiciary Committee hearing in Washington D.C., where McMullen told senators, "Kroger will not close any stores, distribution centers, or manufacturing facilities or lay off any frontline associates as a result of a merger."

Kroger has pledged it will not close stores, and it has assured Wall Street analysts the merged company will remain competitive and win Federal Trade Commission approval by divesting between 100 to 350 stores. When Albertsons bought Safeway in 2015, the merged companies agreed to sell 168 stores to win FTC approval. The commission was especially concerned that communities, where both chains had stores, would suffer from a lack of competition if the new company operated more than one store in a community.

If Kroger can't find buyers for the divested stores, a new stand-alone spinoff company called SpinCo will assume ownership of the stores. The terms of the merger do not include details of SpinCo's obligations to continue operating the stores under its management.

According to the terms of the proposed merger, 650 stores may be divested, far more than what the companies discuss publicly.

In an April 2023 filing by Albertsons Companies Inc. (owned by Kroger) with the Securities and Exchange Commission, the investment banking firms of Goldman Sachs and Credit Suisse advised Kroger/Albertsons, that "it was not obligated to divest more than 650 stores." The 650 stores represent 13% of the merged companies almost 5,000 stores.

In May, the United Food and Commercial Workers International Union told the Wall Street Journal it was opposed to the merger for a variety of reasons including, "potential store divestitures." The newspaper also reported that antitrust officials will be paying attention to the impacts of the proposed merger at the local level.

In a June 2 report regarding the proposed merger, Pablo Garces a financial analyst at S&P Global wrote, "We note that our assumption for the number of store divestitures has increased since the deal's announcement seven months ago, when the companies' estimate of store divestitures stood at 100-375," Garces wrote. "It is S&P Global Ratings' belief that the deal will require more than 375 store divestitures, potentially closer to the 650-store divestment cap."

This merger may impact how many stores Kroger continues to operate in Alamosa and may affect agricultural producers in the San Luis Valley.

A spokesperson for Colorado Agriculture Commissioner Kate Greenberg, told the Valley Courier, "The Commissioner does not have a comment on this merger. The Commissioner does support fair and competitive markets for Colorado producers.

"At this point, we do not know the impact on producers or consumers, since this deal is still undergoing both state and federal review and has not been completed."

Colorado Attorney General Phil Weiser was in Alamosa on Thursday holding a series of listening sessions with consumers and agricultural producers regarding the proposed merger. The Valley Courier will have complete coverage in our Saturday edition.

A request for comment from the Kroger Company was not received by press time.