Industry mega-merger would include Acme, Kings stores in NJ

As part of a strategy to better compete against big box retailers, rivals Kroger and Albertsons – two of the nation’s largest grocery store companies – announced plans to merge.

In an Oct. 14 press release, Ohio-based Kroger said it will acquire Idaho-based Albertsons, which owns more than a dozen grocery chains including Acme Markets and Kings Food Markets in New Jersey, for an estimated $24.6 billion.

Under the agreement, which was unanimously approved by both companies’ boards, Kroger will assume $4.7 billion of Albertsons’ debt.

Kroger also anticipates $1 billion in savings annually through lower administrative costs, more efficient operations and shared investments in technology, and plans to reinvest $500 million into price reductions, $1.3 billion on store updates, and $1 billion for higher employee wages and improved benefits.

Albertsons owns more than 2,200 stores under banners including Albertsons, Balducci’s, Safeway, Vons, Jewel-Osco and Acme Markets. Within New Jersey, Albertsons operates 47 Acme Markets and 17 Kings Food Markets.

In 2015, Albertsons merged with Safeway and then unsuccessfully tried to merge with pharmacy chain Rite Aid in 2018 before going public two years later.

Meanwhile, Kroger controls 2,750 supermarkets through the Kroger, Dillons, Ralph’s, Food 4 Less and Fred Meyer umbrellas.

After Walmart, Kroger is the second-largest grocer by market share in the U.S., while Albertsons is fourth, behind Costco.

While Albertsons and Kroger do have some overlap in locations, particularly on the West Coast, they said the companies would consider spinning off between 100 to 375 stores into a new, standalone entity to get the deal done.

“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders,” said Rodney McMullen, Kroger chairman and chief executive officer, who will continue serving in those roles for the combined company.

“This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors,” McMullen said.

“As a combined entity, we will be better positioned to advance Kroger’s successful go-to-market strategy by providing an incredible seamless shopping experience, expanding Our Brands portfolio, and delivering personalized value and savings,” he stated. “We’ll also be able to further enhance technology and innovation, promote healthier lifestyles, extend our health care and pharmacy network and grow our alternative profit businesses.”

Vivek Sankaran, chief executive officer of Albertsons, said, “Together with Kroger, our combined iconic banners will be able to provide customers with even more value and greater access to fresh food and essential pharmacy services. Given the similarities in the culture and values at Kroger and Albertsons Cos., I am confident that the combination will also have a positive impact on our associates and the communities we are proud to serve. We look forward to working together with Kroger to capture the compelling opportunities ahead.”

Both companies expect the transaction to close in early 2024 provided it receives approval from federal antitrust regulators. However, the merger is likely to undergo heavy scrutiny.

Because of the prominence of both companies, the Federal Trade Commission will be looking closing to ensure that the lack of grocery store competition doesn’t place an undue financial burden on shoppers.

Citi and Wells Fargo Securities LLC are serving as financial advisors while Weil, Gotshal & Manges LLP and Arnold & Porter Kaye Scholer LLP are acting as legal counsel to Kroger.

Goldman Sachs & Co. LLC and Credit Suisse are serving as financial advisors, Jenner & Block LLP is serving as corporate legal counsel and White & Case LLP and Debevoise & Plimpton LLP are acting as antitrust legal counsel to Albertsons.