🛒 Kroger-Albertsons Merger: National Impact

[storewanderer]

FTC possibly wrapping up compliance relating to the Kroger/Albertsons merger:
https://www.winsightgrocerybusiness.com ... ets-closer
"Citing a posting on X from investigative M&A news service Dealreporter, investor website Seeking Alpha reported last week that Kroger and Albertsons were slated to certify “substantial compliance” with the FTC’s second information request around Nov. 15, and the transaction wouldn’t close prior to Feb. 13. The Dealreporter post said the information request compliance date was stated in the “Whalen shareholder lawsuit,” a consumer suit against the merger that was dismissed back in August."
The merger agreement does contain a termination date of at least Jan, 13, 2024, according to SEC filings. However, the termination date can be extended in 30 day blocks until October 9, 2024. Right in the middle of election season.

Note how this article says "C&S is a a large, experienced and unionized grocery industry player". Oh, you meant the de facto successor to Fleming, who was inept at running its own corporate retail? C&S only operates 11 retail stores, they are 99.9% a wholesaler.
C&S is backed by the Japanese bank SoftBank for this deal. I suspect C&S is the puppet, with SoftBank pulling the strings of C&S to flip the divested stores for real estate by 2025 (SoftBank is into real estate). Will turn out similar to the Haggen trainwreck wherein Comvest was using Haggen to buy Albertsons/Safeway divests and flip the stores for real estate months later. I still believe Haggen was used by Comvest as a space-filler in SoCal/NV/AZ.

Lina Khan, the FTC Chair, has been doing town halls relating to the merger. People at the town halls have been mentioning the Haggen trainwreck, even in Denver, where nothing was divested.

AG Bonta here in CA is still deciding if the state of California will sue Kroger.

I'm still praying this merger is stopped.

These AGs need to get going if they plan to sue to block it. The clock is ticking. I am afraid some of them are all talk because they are up for re-election soon and want endorsements from the unions who are against the merger. Where is WA, they were so against it before and the whole dividend thing. What happened? It is like they got paid off or something to shut up. Typical.

I believe C&S committed to operating all of the divested stores. I do not recall if a time period was stated.

This is a departure from when C&S bought Fleming as they actually were sort of the, how do we say, "deposit box of Fleming warehouses/assets" and then they split them off to various other parties and only kept a few facilities themself.

[SamSpade]

These AGs need to get going if they plan to sue to block it. The clock is ticking. I am afraid some of them are all talk because they are up for re-election soon and want endorsements from the unions who are against the merger. Where is WA, they were so against it before and the whole dividend thing. What happened? It is like they got paid off or something to shut up. Typical.

WA AG has become the leading Democratic party nominee for Governor, so I believe his attention has moved to that arena.
OR AG on the other hand has announced she is not running for re-election when her term expires, she has nothing to lose.

[retailfanmitchell019]

I think the merger is going to go through.

For this merger to not go through we need politicians who are razor focused on supporting the unions in fighting this merger.

We are not seeing that. We are seeing AGs who were at first looking aggressive to have moved on, now this, really at this point I think the longer this draws out with the opposition basically in silence mode or impulsive in their behavior and moving on to attacking "the latest mergers of other entities" the more likely it is the merger goes through. I really think that Cigna Humana thing is going to get a lot of the attention this merger should have gotten- I hope- that's another merger I am strongly opposed to.

Kroger says it’s given FTC requested info in Albertsons deal, with decision on govt. challenge ahead:

https://boisedev.com/news/2023/11/30/al ... ger-ftc-2/

FTC chair Lina Khan could still challenge the deal. I don’t think it’s going through before 2024.
The substantial compliance certification could mean the FTC would make a decision on the deal within 30 days, but the agency could move to extend the deadline until October 2024. Lina Khan is more anti-merger than whoever challenged the aborted Walgreens-Rite Aid deal.

This article says a lot about the merger situation:
https://nwlaborpress.org/2023/12/decisi ... ns-merger/

“But one of the country’s leading anti-monopoly advocates says the selloff is a ploy that the FTC is unlikely to fall for.”

““They are merging because they want market power,” said Matt Stoller, the director of research at the American Economics Liberties Project, an anti-monopoly group. “If they had enough divestments to make the merger legal, then it wouldn’t be worth it for them. The crime is the point.””

“John Marshall, capital strategies director at UFCW Local 3000, said the merger will diminish workers’ bargaining power because they will no longer be able to play the two grocery employers against one another.”

“The $1.9 billion purchase price seems fishy, too, Marshall said. By his estimates, the real estate alone is worth at least $2 billion, and the five distribution centers are worth at least $400 million.

This echoes what happened with Haggen: Court documents from the Haggen bankruptcy showed that the company knew buying the stores was risky but went ahead with it anyway because it was “too juicy” a deal to pass up. The real estate was worth more than the stores’ sale price, and Haggen executives knew they could make money selling off the property even if the stores went bankrupt, Marshall said. Marshall suspects Kroger and Albertsons are trying to pull the same stunt with C&S.

Kroger and Albertsons say C&S is in a better financial position than Haggen had been, and their divestiture to C&S is intended to make sure the new company can successfully operate the stores. Stoller, the antitrust expert, doesn’t buy it.

“If you have a bunch of stores and you are selling those stores to someone else that will compete with you, you have a strong incentive to make those stores unsuccessful,” Stoller said. Stoller said that’s something the FTC is probably considering in its investigation of the merger.“


This is what I’ve been suspecting the whole time: C&S is going to be Haggen 2.0. It’s no wonder they are licensing the Albertsons name in a few states (yet another fishy part of the deal that the Feds should mention). Convenient if they auction off the stores for real estate and Kroger gets the stores back for pennies on the dollar. No sign changing needed. At that point, I’m thinking, “Might as well sell the divests to Fast Eddie”.
If they want this merger to go through, they need to get more serious about divests. Sell the entire Albertsons banner, along with QFC, Mariano’s, Carrs, and some Safeway/Vons stores all to a stronger buyer, like Ahold. They need to divest at least 500 stores.

This C&S deal still reminds me of the aborted deal Fred’s (RIP) had to acquire Walgreens/Rite Aid divests. There are striking similarities:
1. Fred’s had an agreement to keep the Rite Aid name on divests for 24 months. C&S will be licensing the Albertsons name in CA, AZ, CO, WY.
2. Fred’s announced it would buy 865 stores, yet the locations weren’t identified. The 413 stores C&S is buying aren’t identified.

[ClownLoach]

I think the merger is going to go through.

For this merger to not go through we need politicians who are razor focused on supporting the unions in fighting this merger.

We are not seeing that. We are seeing AGs who were at first looking aggressive to have moved on, now this, really at this point I think the longer this draws out with the opposition basically in silence mode or impulsive in their behavior and moving on to attacking "the latest mergers of other entities" the more likely it is the merger goes through. I really think that Cigna Humana thing is going to get a lot of the attention this merger should have gotten- I hope- that's another merger I am strongly opposed to.

Kroger says it’s given FTC requested info in Albertsons deal, with decision on govt. challenge ahead:

https://boisedev.com/news/2023/11/30/al ... ger-ftc-2/

FTC chair Lina Khan could still challenge the deal. I don’t think it’s going through before 2024.
The substantial compliance certification could mean the FTC would make a decision on the deal within 30 days, but the agency could move to extend the deadline until October 2024. Lina Khan is more anti-merger than whoever challenged the aborted Walgreens-Rite Aid deal.

This article says a lot about the merger situation:
https://nwlaborpress.org/2023/12/decisi ... ns-merger/

“But one of the country’s leading anti-monopoly advocates says the selloff is a ploy that the FTC is unlikely to fall for.”

““They are merging because they want market power,” said Matt Stoller, the director of research at the American Economics Liberties Project, an anti-monopoly group. “If they had enough divestments to make the merger legal, then it wouldn’t be worth it for them. The crime is the point.””

“John Marshall, capital strategies director at UFCW Local 3000, said the merger will diminish workers’ bargaining power because they will no longer be able to play the two grocery employers against one another.”

“The $1.9 billion purchase price seems fishy, too, Marshall said. By his estimates, the real estate alone is worth at least $2 billion, and the five distribution centers are worth at least $400 million.

This echoes what happened with Haggen: Court documents from the Haggen bankruptcy showed that the company knew buying the stores was risky but went ahead with it anyway because it was “too juicy” a deal to pass up. The real estate was worth more than the stores’ sale price, and Haggen executives knew they could make money selling off the property even if the stores went bankrupt, Marshall said. Marshall suspects Kroger and Albertsons are trying to pull the same stunt with C&S.

Kroger and Albertsons say C&S is in a better financial position than Haggen had been, and their divestiture to C&S is intended to make sure the new company can successfully operate the stores. Stoller, the antitrust expert, doesn’t buy it.

“If you have a bunch of stores and you are selling those stores to someone else that will compete with you, you have a strong incentive to make those stores unsuccessful,” Stoller said. Stoller said that’s something the FTC is probably considering in its investigation of the merger.“


This is what I’ve been suspecting the whole time: C&S is going to be Haggen 2.0. It’s no wonder they are licensing the Albertsons name in a few states (yet another fishy part of the deal that the Feds should mention). Convenient if they auction off the stores for real estate and Kroger gets the stores back for pennies on the dollar. No sign changing needed. At that point, I’m thinking, “Might as well sell the divests to Fast Eddie”.
If they want this merger to go through, they need to get more serious about divests. Sell the entire Albertsons banner, along with QFC, Mariano’s, Carrs, and some Safeway/Vons stores all to a stronger buyer, like Ahold. They need to divest at least 500 stores.

This C&S deal still reminds me of the aborted deal Fred’s (RIP) had to acquire Walgreens/Rite Aid divests. There are striking similarities:
1. Fred’s had an agreement to keep the Rite Aid name on divests for 24 months. C&S will be licensing the Albertsons name in CA, AZ, CO, WY.
2. Fred’s announced it would buy 850 stores, yet the locations weren’t identified. The 413 stores C&S is buying aren’t identified.

The problem here remains the same as we've all circulated ad nauseum.

If you believe that they need to divest more stores (and since we don't have definite knowledge of what stores are going away it's an easy conclusion to reach), nobody will pay top dollar for them because if they did then they're basically financing the merger of the competitor. Bottom feeders like C&S will pay bargain prices, but the cost of every store being kept in the merger deal goes up with every store divested for pennies. But stores sold for pennies could be worth more dead than alive especially if real estate is sold with them. So there becomes this paradox where the more they divest the more they pay for the stores they're acquiring and the worse the situation will become for the customer since they will have to pass that cost along in higher prices. Coupled with the likelihood that divested stores are much more likely to be closed than stores that are kept simply because of the extremely high cost per store where they could never make up the expense by closing stores to cut costs except for maybe very low volume, overstored markets and I don't see many of those places served by these two companies.

And if they released a divestiture list this early in the merger process it would turn into a road map for the competition (because there really is plenty of it, just not traditional Kroger or Albertsons style supermarkets). If you knew that Albertsons stores 4444 and 5555 in your area were being divested and you were say Stater Bros or Walmart then you would start immediately with very aggressive price campaigns and make an effort to kill those stores off now and take their customers before they change hands - so then there will be even more customers to take. Having a road map to competitive changes is insanely valuable, if you're not sure then we can talk about Target Canada and how releasing the list of locations nearly 3 years in advance worked out for them (every Walmart and Loblaw concept surrounding a Target Canada site was thoroughly remodeled and prices slashed to welcome them and ensure they would struggle greatly even if they did operate well). Some of the divest proposals I've read here are preposterous, my favorites are ones where I see that the combined companies have less stores together after the merger than before as if that would work out well (combined company spends tens of billions of dollars to have less stores and give competition near monopoly power).

It's a mess, but I don't think they can actually stop it, the Rite Aid bankruptcy is actually going to strengthen their argument (since they'll claim that Walgreens wouldn't have gone bankrupt) and they'll find some paid puppets who will say that they face the same fate separate. This is why I say the best way to handle it will be to impose specific, enforceable regulations with defined penalties on future anticompetitive behavior that is more harmful than the merger itself. #1 on my list being dead rent, if you close it you must pay the lease severance fee anytime for the next 20+ years of closures, if you own it then it must be listed for sale at fair market price so there are no barriers to competitors opening in their sites. I'm suspicious they're more concerned about the reinvigorated ethnic competitors that are executing at the same level or better and diversifying their focus to embrace every community with a superior experience to Kroger or Albertsons than the competition they each pose to one another.

[storewanderer]

C&S appears to be a lot stronger financially than Fred's was though... but we don't really know because they are privately held.

I think they are going to have a hard time saying C&S is not in good enough financial condition to complete this transaction. This is a screaming bargain for C&S.

They need to bar Kroger from buying any of these stores back and building any new stores within x miles of the divested stores for a 10 year period. They did something like this with Albertsons/ASC merger in 1999. A state like California should take the lead here and start to make this kind of demand.

C&S was selected as the buyer for a reason and I think Kroger knows what they are doing. I am confident it is the Kroger side that pushed C&S as a buyer out of nowhere rather than the Save Mart operation run by an investment group that is former Cerberus people and with a bunch of veteran Albertsons LLC people in upper management that is clearly very well connected.

[babs]

C&S appears to be a lot stronger financially than Fred's was though... but we don't really know because they are privately held.

I think they are going to have a hard time saying C&S is not in good enough financial condition to complete this transaction. This is a screaming bargain for C&S.

They need to bar Kroger from buying any of these stores back and building any new stores within x miles of the divested stores for a 10 year period. They did something like this with Albertsons/ASC merger in 1999. A state like California should take the lead here and start to make this kind of demand.

C&S was selected as the buyer for a reason and I think Kroger knows what they are doing. I am confident it is the Kroger side that pushed C&S as a buyer out of nowhere rather than the Save Mart operation run by an investment group that is former Cerberus people and with a bunch of veteran Albertsons LLC people in upper management that is clearly very well connected.

The larger issue is that in many areas, C and S is not a competitive chain. 4 stores in Utah, 66 stores in California, 26 stores in Texas, 2 in Louisiana, 2 in Montana...in these areas, this is not a viable chain unless they commit to opening more stores.

[wnetmacman]

The larger issue is that in many areas, C and S is not a competitive chain. 4 stores in Utah, 66 stores in California, 26 stores in Texas, 2 in Louisiana, 2 in Montana...in these areas, this is not a viable chain unless they commit to opening more stores.

Keep in mind that C&S is not truly a chain - they are a distributor with thousands of customer stores.

While they are only getting a small number of stores, they have many customers who will quickly snap them up. They could be Piggly Wiggly. In Texas, they could be something else, and so forth. These stores will become rentals most likely to customers. This is what sets them aside from Haggen or Fred's: they aren't just for themself.

[BillyGr]

The larger issue is that in many areas, C and S is not a competitive chain. 4 stores in Utah, 66 stores in California, 26 stores in Texas, 2 in Louisiana, 2 in Montana...in these areas, this is not a viable chain unless they commit to opening more stores.

Keep in mind that C&S is not truly a chain - they are a distributor with thousands of customer stores.

While they are only getting a small number of stores, they have many customers who will quickly snap them up. They could be Piggly Wiggly. In Texas, they could be something else, and so forth. These stores will become rentals most likely to customers. This is what sets them aside from Haggen or Fred's: they aren't just for themself.

And they have run stores for a time (the Grand Union leftovers), where they started out with about 30-40 (having sold off most of the 180+ quickly to other companies, with a few closed for other uses outside grocery), scattered between NY, VT and PA (at least), then kept cutting the number back as they were either sold or closed, before Tops took over the remaining stores (basically all in areas with no other store in town).

So, they do have experience running stores that are spread out and in small groups, particularly if they may also be in areas that they are already delivering to on the wholesale side, thus adding a couple stores isn't a big issue.

[pseudo3d]

C&S appears to be a lot stronger financially than Fred's was though... but we don't really know because they are privately held.

C&S got a big bank loan for the deal, and being heavily indebted without a real good plan how to turn your business around isn't a formula for success.

Eyeballing the existing Grand Union stores in upstate New York indicate they've suffered greatly as far as seafood and meat goes, probably cutbacks to try to keep the stores open.

[ClownLoach]

C&S appears to be a lot stronger financially than Fred's was though... but we don't really know because they are privately held.

C&S got a big bank loan for the deal, and being heavily indebted without a real good plan how to turn your business around isn't a formula for success.

Eyeballing the existing Grand Union stores in upstate New York indicate they've suffered greatly as far as seafood and meat goes, probably cutbacks to try to keep the stores open.

I think the long game for C&S will be to sell the acquired stores to other operators. They could easily sell off many of the stores in major metros to whatever competitors remain, and then find IGA type buyers for the smaller town stores. For the smaller town stores sold off they will likely maintain contracts to supply them.

Are you sure the bank loan isn't to set up a revolver for purchasing? To suddenly be operating this many stores such a credit line would be an essential requirement. All of these stores are still running on the modern Wall Street model of using someone else's money to buy the goods on the shelves, then hopefully sell them before the bill comes due to minimize the interest expense.

Not having such an arrangement would be seen as a sign of financial weakness and likely cause the FTC to disqualify them as a "strong" operator. Sometimes debt is a good thing.