Kroger, Albertsons To Divest More Stores

Kroger and Albertsons have expanded the number of stores they’re selling in an effort to convince regulators to drop a federal lawsuit seeking to block the supermarket giants’ $25 billion merger.

The retail chains, which agreed in September to sell 413 stores to C&S Wholesale Grocers, announced on Monday they will increase that number to 579.

Most of the stores added to the divestiture list are in Arizona, where 101 stores will change hands, up from 24 under the prior plan; Colorado, which increases to 91 divested stores from 52; and Illinois, where the number of stores to be sold has doubled to 35.

The expanded divestiture deal with C&S, an all-cash transaction now valued at nearly $3 billion, adds stores under the Haggen banner to the QFC, Mariano’s and Carrs branded stores that were part of the original deal. C&S also will license the Albertsons banner in California and Wyoming and the Safeway banner in Arizona and Colorado under the updated package.

The amended plan “responds to concerns raised by federal and state antitrust regulators,” Kroger CEO Rodney McMullen said in a statement.

“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 [and] all existing collective bargaining agreements will continue,” McMullen said. “Our proposed merger with Albertsons will bring lower prices and more choices to more customers and secure the long-term future of unionized grocery jobs.”

In February, the Federal Trade Commission, eight states and Washington DC sued to block the proposed merger, which the FTC said would lead to higher grocery prices and lower wages for workers.

“This supermarket mega-merger comes as American consumers have seen the cost of groceries rise steadily over the past few years. Kroger’s acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today,” Henry Liu, director of the FTC’s Bureau of Competition, said in a statement issued when the federal lawsuit was filed.

The FTC’s lawsuit also challenged whether the stores sold to C&S would constitute a “functioning business” that could compete with the industry giants, including a merged Kroger and Albertsons.

Eric Winn, CEO of C&S, responded in a statement on Monday saying, “We are confident this expanded divestiture package will provide the stores, supporting assets and expert operators needed to ensure these stores continue to successfully serve their communities for many generations to come,” Winn said.

Kroger said in its statement this week that the amended divestiture package also expands “corporate and office infrastructure” provided to C&S “to ensure C&S can continue to operate the divested stores competitively and cohesively.”

All fuel centers and pharmacies associated with the divested stores will remain with the stores and continue to operate, Kroger added.