Kroger to merge with Albertsons?

[pseudo3d]

Well, I fear this merger is actually going to be completed...
https://www.winsightgrocerybusiness.com ... sed-nicely

So wait...the second review the FTC wanted back in December is just being completed now, six months later? That doesn't sound "good for the merger" at all.

If Kroger and Albertsons are a few months away from certifying compliance with the FTC's latest request for information and expect to deliver by calendar Q3/early fall, the FTC will need time to review the information. And they will ask for more information. And Kroger/Albertsons will need a few months, and... the FTC will need...

As far expecting the transaction closing in early 2024, it is possible. How probable is it? Hmmmm...

I had to go back and check to see what the original closing date was. I'd expect to see that if the merger drags on, there would be pushing the date back, but it's still early 2024.

Also, the fact that FTC is coming down hard on Activision Blizzard/Microsoft merger indicates that they may do the same for Kroger.

[ClownLoach]

Well, I fear this merger is actually going to be completed...
https://www.winsightgrocerybusiness.com ... sed-nicely

Of course they are saying "it is going nicely." They certainly wouldn't say "Oh, my God this is a s***show. What the f*** were we thinking? Put us out of our misery right now." during an earnings call!

I'd wait for the FTC to chime in before making such a statement. I continue to believe the FTC will block it or require much more substantial divestitures.

Exactly.

If Kroger and Albertsons are a few months away from certifying compliance with the FTC's latest request for information and expect to deliver by calendar Q3/early fall, the FTC will need time to review the information. And they will ask for more information. And Kroger/Albertsons will need a few months, and... the FTC will need...

As far expecting the transaction closing in early 2024, it is possible. How probable is it? Hmmmm...

Right on. He is going to keep saying positive things until the hammer inevitably comes down. Who cares if they're able to certify compliance with an information request? Of course they'd be able to, because if they couldn't provide the required information then there would be much more serious concerns.

As far as the divestiture situation, first I am sure that they're going to hold on the original cap of 600-something maximum. And we know that number is probably assuming that the majority of divests (or spins which I still don't think will happen) are lower revenue stores... If the FTC comes back and says 1000 then Kroger will probably put up a fight but ultimately walk because at that point they're not getting enough stores to support all the overhead they're buying and redoing the deal to split up infrastructure like warehouses would draw the process out several more years and probably reset the entire FTC process back to square one. To put it bluntly, if they can acquire the entire Albertsons corporation minus 600 stores then it's worth doing the deal. If it's going to be Albertsons minus 1000-1200 stores then it's way, way too costly to process such a merger and all the baggage brought to the table (such as consolidating the corporate offices, warehouses etc). And considering the poison pill type deal Albertsons made to practically guarantee a breakup if this merger gets denied - then the only positive argument I can make is that everyone is probably better off with the Kroger acquisition of the vast majority of the company and stores because there will be far more closures and layoffs in a breakup. Plus Kroger will assuredly buy most of the stores in that deal anyway.

There's something to be said about this promise not to close anything. I think their argument is going to be that the communities and employees are better off with the merger than without. Let us merge and sell/spin only the absolute true overlap stores and the rest stays open and jobs are kept. With this merger and the fewest possible divestitures more stores stay open and more union jobs are kept. They're going to try to dazzle the FTC and everyone else with slick PowerPoints showing that without the merger there will be more closures overall leaving less stores for consumers and thus reducing competition more than the merger would. The fundamental problem is what Kroger is going to try to claim as a reason to allow it: in all these mergers the majority of divestitures close within the next decade unless sold to a strong local competitor that's already in the market (such as Stater Bros in SoCal). The problem is that there's so little competition left in most markets that a sale of significance to an in-place chain like Stater would catapult the competitor into a potential duopoly which is a problem itself. And a sale to a chain that's from outside of the market is much more likely to fail even if they're successful elsewhere for many reasons (Haggen obviously was too small to bite off so many stores - but even if Haggen was a thousand store chain the changes they brought and ineptitude about their new market entries doomed them anyway). Yes we see Save Mart lined up for acquisitions but even then that could backfire especially if/when Kroger refuses to sell a banner and they're forced to rebrand. The Spinco thing is not viable and we all know it, nor would anyone acquire Spinco itself when they already rejected the option to buy the stores. The fact is the opportunity to buy prior to a forced spinoff into shark infested waters would be for a much lesser price. (Because we know they'll try to spin off booking at a higher value per store than what competitors would have been willing to pay plus they'll be forced to invest in creating their own infrastructure to survive like distribution deals and IT and HQ and such). I don't think it is legal to require Kroger to make assurances that Spinco stays alive.

[ClownLoach]

Well, I fear this merger is actually going to be completed...
https://www.winsightgrocerybusiness.com ... sed-nicely

So wait...the second review the FTC wanted back in December is just being completed now, six months later? That doesn't sound "good for the merger" at all.

If Kroger and Albertsons are a few months away from certifying compliance with the FTC's latest request for information and expect to deliver by calendar Q3/early fall, the FTC will need time to review the information. And they will ask for more information. And Kroger/Albertsons will need a few months, and... the FTC will need...

As far expecting the transaction closing in early 2024, it is possible. How probable is it? Hmmmm...

I had to go back and check to see what the original closing date was. I'd expect to see that if the merger drags on, there would be pushing the date back, but it's still early 2024.

Also, the fact that FTC is coming down hard on Activision Blizzard/Microsoft merger indicates that they may do the same for Kroger.

The Activision/Blizzard deal would almost assuredly kill support down the line for competing game systems and there's no way to force them to develop for Nintendo, Sony etc. Even if they promise to do so, there will always be an incentive to do better for Xbox or Windows. We've all seen how somehow certain video games "play better" on one platform versus another. Magically every game that came from that merger would develop the same situation. The Activision and Blizzard merger itself shouldn't have happened either.

[veteran+]

I'm just blown away by this interesting form of corporate extortion.

Approve the merger or Alberstons will break up (or whatever) and cause devastating job losses and perhaps some food deserts.



BTW......................I have no confidence in the FTC but I would be jubilant if they finally do their job

[BillyGr]

The fundamental problem is what Kroger is going to try to claim as a reason to allow it: in all these mergers the majority of divestitures close within the next decade unless sold to a strong local competitor that's already in the market (such as Stater Bros in SoCal). The problem is that there's so little competition left in most markets that a sale of significance to an in-place chain like Stater would catapult the competitor into a potential duopoly which is a problem itself.

What is the issue with this duopoly that you mention?
Other areas already have such in the traditional supermarket field.
For instance, in this part of NY State, you have Price Chopper and Hannaford. There are a few scattered stores (such as the 5 ShopRite stores, confined to 3 in a small area of Albany County, one in Schenectady County and one in Rensselaer County, the few random Tops that were old Grand Unions and a very few scattered IGA type stores), but for people in the majority of the region, it's only those two.
Something similar happens in much of Maine with Hannaford and Shaw's, and probably a few other smaller pockets in New England as well.

[storewanderer]

The fundamental problem is what Kroger is going to try to claim as a reason to allow it: in all these mergers the majority of divestitures close within the next decade unless sold to a strong local competitor that's already in the market (such as Stater Bros in SoCal). The problem is that there's so little competition left in most markets that a sale of significance to an in-place chain like Stater would catapult the competitor into a potential duopoly which is a problem itself.

What is the issue with this duopoly that you mention?
Other areas already have such in the traditional supermarket field.
For instance, in this part of NY State, you have Price Chopper and Hannaford. There are a few scattered stores (such as the 5 ShopRite stores, confined to 3 in a small area of Albany County, one in Schenectady County and one in Rensselaer County, the few random Tops that were old Grand Unions and a very few scattered IGA type stores), but for people in the majority of the region, it's only those two.
Something similar happens in much of Maine with Hannaford and Shaw's, and probably a few other smaller pockets in New England as well.

And in parts of the Central US/South that Duopoly is Kroger/Wal Mart.

That is the point. Out on the West Coast there is not much of this Duopoly thing yet. But with this merger it pushes many markets toward that type of a situation.

On another note, it was quiet, but Teamsters came out in opposition to the merger last week. Teamsters claimed they had spent a lot of time working with Kroger Management before coming to this point that they stated their opposition to the merger publicly.

[arizonaguy]

I'm just blown away by this interesting form of corporate extortion.

Approve the merger or Alberstons will break up (or whatever) and cause devastating job losses and perhaps some food deserts.



BTW......................I have no confidence in the FTC but I would be jubilant if they finally do their job

If the merger is approved there will be devastating job losses and perhaps some food deserts.

The combined company will not keep all of the stores, distribution centers and other facilities in overlapping areas. My uneducated guestimate is that there will be at least 300 - 600 store closures (more closures if less is divested) in AZ/CA/CO/IL/NM/NV/OR/TX/WA as a result of this merger and then about 20 - 30 additional store closures in the Mid Atlantic as a direct result of this merger. Probably also the closure of 6 or 7 distribution centers as well as additional closures of regional offices, etc. These closures won't all happen at once but I expect that they will occur within the first 5 years of the completion of the merger.

That's not all. Due to the additional debt that Kroger will take on as a result of this merger I expect another 150 - 300 closures of stores in core Kroger areas that don't overlap with Albertsons stores and/or are in areas such as California and the PNW (even in areas of little to no overlap) where the land the store sits on ends up more valuable than a marginally preforming store.

Kroger isn't Publix. It's not going to operate stores next to each other or across the street from each other indefinitely. It can't. It's shareholders won't allow it.

Anyone who believes the line that nothing is closing as a result of this merger is living under a rock.

So, to recap, if this is approved and even if Spinco or others divest 300 stores (which likely will close in short order), we'll probably lose another 450 - 900 stores (so essentially most of Albertsons store count anyways) if the merger does happen. It just may take 5 years for this to occur and the end result will be Kroger marginally larger than it is today but in a much weaker position financially as well as in the eyes of the consumer.

I truly believe that an independent Albertsons (even if broken up) might still be a better option for more communities than this merger.

[HCal]

I am looking forward to Safeway's terrible pricing being addressed by Kroger. Perhaps they can do a close to this stupid "sincerely" ad campaign.

I'm sure that lowering pricing is going to be last on the to-do list if the merger is approved. If history is any guide, less competition leads to higher prices.

Kroger says on the merger website that upon closing, they will invest $500 million to lower prices. If all of that is invested in Albertsons-owned stores in one year, it works out to a price drop of around 0.6%, in other words a $100 basket will become $99.40.

Obviously this will still be much higher than Kroger's pricing. This means there are two options. Either Kroger will keep different pricing at the two groups of stores, or they will raise prices at the legacy Kroger stores to match. I'm sure we all know which option they will pick.

[storewanderer]

I'm sure that lowering pricing is going to be last on the to-do list if the merger is approved. If history is any guide, less competition leads to higher prices.

Kroger says on the merger website that upon closing, they will invest $500 million to lower prices. If all of that is invested in Albertsons-owned stores in one year, it works out to a price drop of around 0.6%, in other words a $100 basket will become $99.40.

Obviously this will still be much higher than Kroger's pricing. This means there are two options. Either Kroger will keep different pricing at the two groups of stores, or they will raise prices at the legacy Kroger stores to match. I'm sure we all know which option they will pick.

Part of their historical investing in price involved other cost cutting (backstage overhead especially, but also greater efficiency with promotions such as sales floor display ready pallets of assortments of major vendor items such as P&G, Conagra, and some private label shipped straight to the stores sales floor ready for promotions- this is something Safeway/Albertsons almost never do) as well as a reliance on increased sales as a result of the price cuts. The investment isn't as simple as throw $500 million at price cuts and keep everything else the same. There is more to it than that.

Where this will be unfortunate for a customer like me is knowing how Kroger works. Kroger throws you through 10 hoops to get sale prices with digital coupons, quantity purchases, etc. and it is not unusual for Safeway's sale prices to beat Kroger's sale prices. While there are some items I buy at Kroger, it is mostly private label grocery/drug, produce, or meat (as these are all below market everyday in my market anyway; 40-60% lower than Safeway's everyday prices on many items in private label grocery/drug, produce, and meat).

Safeway meanwhile does these ridiculous things like this "Fresh Adventure" thing where I go play their re-run from last year cooking videos in a bunch of dormant browsers to earn game plays then go play some game and keep getting random offers; 1 reward, 5 rewards, $10 off any purchase, $15 off meat, $10 off deli, $10 off bakery, various $1 off category or item specific coupons. In the end I expect to benefit well over $100 from this promotion. This type of thing is not going to keep happening under Kroger. A small number of customers have a lopsided benefit from promotions like this (and I am part of that group) while the majority of customers who still bother to shop Safeway and haven't bolted for lower priced options pay bloated prices to subsidize all of this for few customers.

[BillyGr]

The fundamental problem is what Kroger is going to try to claim as a reason to allow it: in all these mergers the majority of divestitures close within the next decade unless sold to a strong local competitor that's already in the market (such as Stater Bros in SoCal). The problem is that there's so little competition left in most markets that a sale of significance to an in-place chain like Stater would catapult the competitor into a potential duopoly which is a problem itself.

What is the issue with this duopoly that you mention?
Other areas already have such in the traditional supermarket field.
For instance, in this part of NY State, you have Price Chopper and Hannaford. There are a few scattered stores (such as the 5 ShopRite stores, confined to 3 in a small area of Albany County, one in Schenectady County and one in Rensselaer County, the few random Tops that were old Grand Unions and a very few scattered IGA type stores), but for people in the majority of the region, it's only those two.
Something similar happens in much of Maine with Hannaford and Shaw's, and probably a few other smaller pockets in New England as well.

And in parts of the Central US/South that Duopoly is Kroger/Wal Mart.

That is the point. Out on the West Coast there is not much of this Duopoly thing yet. But with this merger it pushes many markets toward that type of a situation.

On another note, it was quiet, but Teamsters came out in opposition to the merger last week. Teamsters claimed they had spent a lot of time working with Kroger Management before coming to this point that they stated their opposition to the merger publicly.

The point was, it's not a problem since it already exists, and there are other options for the same items besides just the two grocery store chains these days (see Aldi/Lidl and similar stores, Whole Foods type. Dollar General and similar and more).