🛒 Kroger-Albertsons Merger: National Impact

[pseudo3d]

FTC, states could sue over Kroger-Albertsons $24.6 billion deal next week, Bloomberg reports
https://www.reuters.com/markets/deals/f ... 024-02-20/

I wonder if they try to pull a 7-Eleven and ignore the agreement then close the deal... Flagrant disregard for the law seems to be accepted by today's FTC. What exactly would/could stop them?

That won't happen, though it could've happened if no one called them out. Remember, American Stores almost got away with buying Lucky until the California AG raised a stink and ultimately forced them to go through a bunch of court battles before selling Alpha Beta instead.

Realistically though I think the fact that Apollo could swallow Albertsons whole and pump them full of debt might be enough to convince Cerberus to accept them as a buyer and we will see Albertsons take whatever breakup fee they're entitled to from Kroger then go private.

Part of the problem is they've already stripped out a lot of wealth from Albertsons to go to shareholders (i.e. them), likely as part of a contingency plan, so it may not be necessary. I'm not sure there's a breakup fee either. Apollo buying them potentially runs into the problem into the fact that Heritage Grocers Group is already owned by Apollo, with Cardenas in California, El Rancho in Texas (they bought out Albertsons' share), and Tony's Fresh Market in Chicagoland...while I can see Albertsons getting merged in with them, I'm not sure if the future is that dire. They're probably already in talks with other companies as a backup plan.

[ClownLoach]

FTC, states could sue over Kroger-Albertsons $24.6 billion deal next week, Bloomberg reports
https://www.reuters.com/markets/deals/f ... 024-02-20/

I wonder if they try to pull a 7-Eleven and ignore the agreement then close the deal... Flagrant disregard for the law seems to be accepted by today's FTC. What exactly would/could stop them?

That won't happen, though it could've happened if no one called them out. Remember, American Stores almost got away with buying Lucky until the California AG raised a stink and ultimately forced them to go through a bunch of court battles before selling Alpha Beta instead.

Realistically though I think the fact that Apollo could swallow Albertsons whole and pump them full of debt might be enough to convince Cerberus to accept them as a buyer and we will see Albertsons take whatever breakup fee they're entitled to from Kroger then go private.

Part of the problem is they've already stripped out a lot of wealth from Albertsons to go to shareholders (i.e. them), likely as part of a contingency plan, so it may not be necessary. I'm not sure there's a breakup fee either. Apollo buying them potentially runs into the problem into the fact that Heritage Grocers Group is already owned by Apollo, with Cardenas in California, El Rancho in Texas (they bought out Albertsons' share), and Tony's Fresh Market in Chicagoland...while I can see Albertsons getting merged in with them, I'm not sure if the future is that dire. They're probably already in talks with other companies as a backup plan.

Apollo has enough interest in seeing an Albertsons transaction that they'll push Heritage off onto the folks who bought Smart & Final from them. They aren't going to trip over pennies in search of dollars.

Apollo was revealed to be the big new stakeholder about the same time we all heard about Albertsons "pursuing strategic alternatives." They came to see some sort of transaction through. Cerberus isn't the engine. If they wanted out they could have just sold their stake to Apollo. Apollo is the one that pushed Albertsons to decide to sell outright. They want a transaction where they can sell financing and dump debt onto someone. Guarantee they wanted this merger so they could refinance all the debt of the new combined company and own all the paper. If this wasn't what they wanted then they never would have invested. If they can make a outright purchase then they can force feed them obscene amounts of debt. Apollo peddles debt. It's what they do. They finance transactions (as we can assume they're lined up for in the Kroger deal) or they privatize and load debt. They are not the typical "fix it up and IPO it" PE firm. They own enough to wield influence already and will see a transaction through even if it means buying it out themselves. They literally have no other reason to be involved.

[storewanderer]

I wonder if they try to pull a 7-Eleven and ignore the agreement then close the deal... Flagrant disregard for the law seems to be accepted by today's FTC. What exactly would/could stop them?

Realistically though I think the fact that Apollo could swallow Albertsons whole and pump them full of debt might be enough to convince Cerberus to accept them as a buyer and we will see Albertsons take whatever breakup fee they're entitled to from Kroger then go private.

I think the WA lawsuit stops that from possibly happening.

At least... stops it from happening in WA...

[HCal]

I wonder if they try to pull a 7-Eleven and ignore the agreement then close the deal... Flagrant disregard for the law seems to be accepted by today's FTC. What exactly would/could stop them?

7-Eleven didn't ignore anything. There was no court order blocking the acquisition, because the FTC didn't file a case for whatever reason. 7-Eleven made a calculated decision that the FTC would accept the agreement they reached with the staff, and it was better to proceed with the acquisition and sort it out later. The FTC did eventually file a complaint and they reached a settlement to divest some stores. I'm not sure why this happened but I suspect it was infighting between FTC members.

In this Kroger-Albertsons case, two states have already filed cases, and more may do so soon along with the FTC. All it takes is one judge to issue an injunction before the merger deadline, which is currently set at a week from today. No company is going to ignore a court order, there are very serious consequences for doing so.

[pseudo3d]

I wonder if they try to pull a 7-Eleven and ignore the agreement then close the deal... Flagrant disregard for the law seems to be accepted by today's FTC. What exactly would/could stop them?

That won't happen, though it could've happened if no one called them out. Remember, American Stores almost got away with buying Lucky until the California AG raised a stink and ultimately forced them to go through a bunch of court battles before selling Alpha Beta instead.

Realistically though I think the fact that Apollo could swallow Albertsons whole and pump them full of debt might be enough to convince Cerberus to accept them as a buyer and we will see Albertsons take whatever breakup fee they're entitled to from Kroger then go private.

Part of the problem is they've already stripped out a lot of wealth from Albertsons to go to shareholders (i.e. them), likely as part of a contingency plan, so it may not be necessary. I'm not sure there's a breakup fee either. Apollo buying them potentially runs into the problem into the fact that Heritage Grocers Group is already owned by Apollo, with Cardenas in California, El Rancho in Texas (they bought out Albertsons' share), and Tony's Fresh Market in Chicagoland...while I can see Albertsons getting merged in with them, I'm not sure if the future is that dire. They're probably already in talks with other companies as a backup plan.

Apollo has enough interest in seeing an Albertsons transaction that they'll push Heritage off onto the folks who bought Smart & Final from them. They aren't going to trip over pennies in search of dollars.

Apollo was revealed to be the big new stakeholder about the same time we all heard about Albertsons "pursuing strategic alternatives." They came to see some sort of transaction through. Cerberus isn't the engine. If they wanted out they could have just sold their stake to Apollo. Apollo is the one that pushed Albertsons to decide to sell outright. They want a transaction where they can sell financing and dump debt onto someone. Guarantee they wanted this merger so they could refinance all the debt of the new combined company and own all the paper. If this wasn't what they wanted then they never would have invested. If they can make a outright purchase then they can force feed them obscene amounts of debt. Apollo peddles debt. It's what they do. They finance transactions (as we can assume they're lined up for in the Kroger deal) or they privatize and load debt. They are not the typical "fix it up and IPO it" PE firm. They own enough to wield influence already and will see a transaction through even if it means buying it out themselves. They literally have no other reason to be involved.

Well, in the case of Smart & Final, Apollo acquired it in 2007. In that time, they had the short-lived SmartCo Foods stores in Denver and then sold their stake to Ares in 2012. In 2019, they bought Smart & Final and took it private (Smart & Final went public in 2014), and that's when they sold the foodservice stores to US Foods and sold the rest to (what was named at the time) Bodega Latina.

If they have a plan to sell Heritage Grocers Group to Chedraui USA, then that would mean Fiesta and El Rancho in Texas have common ownership...and frankly I don't know if Chedraui USA acquired it with Apollo's debt.

[storewanderer]

I wonder if they try to pull a 7-Eleven and ignore the agreement then close the deal... Flagrant disregard for the law seems to be accepted by today's FTC. What exactly would/could stop them?

7-Eleven didn't ignore anything. There was no court order blocking the acquisition, because the FTC didn't file a case for whatever reason. 7-Eleven made a calculated decision that the FTC would accept the agreement they reached with the staff, and it was better to proceed with the acquisition and sort it out later. The FTC did eventually file a complaint and they reached a settlement to divest some stores. I'm not sure why this happened but I suspect it was infighting between FTC members.

In this Kroger-Albertsons case, two states have already filed cases, and more may do so soon along with the FTC. All it takes is one judge to issue an injunction before the merger deadline, which is currently set at a week from today. No company is going to ignore a court order, there are very serious consequences for doing so.

Yes, it was a big deal that WA filed that suit. They could have absolutely pushed through the way 7-Eleven/Speedway did, had WA not done that. But WA did it. I wish 7-Eleven/Speedway would have been blocked. Teamsters came out against it for some reason (maybe they drive fuel trucks or something, not sure what exactly their interest was).

However I do think they will be successful in court defending and pushing the merger through. I don't think the merger is any good for much of anyone involved including customers/shareholders/employees but I think Kroger can win a lawsuit against FTC/various states that try to block the merger. I just hope the merger gets stopped before it goes that far. They can't waste time caught trying to force through this merger forever. Their CFO is already going to Costco, who knows what other management changes may occur with time; people retire, get surprise job offers (like the Costco one), etc.

[retailfanmitchell019]

However I do think they will be successful in court defending and pushing the merger through. I don't think the merger is any good for much of anyone involved including customers/shareholders/employees but I think Kroger can win a lawsuit against FTC/various states that try to block the merger. I just hope the merger gets stopped before it goes that far. They can't waste time caught trying to force through this merger forever. Their CFO is already going to Costco, who knows what other management changes may occur with time; people retire, get surprise job offers (like the Costco one), etc.

As @ClownLoach noted, the DOJ successfully blocked the JetBlue/Spirit Airlines merger, which would only have 10% market share in the airline industry. If they’ll block that deal, they’ll likely block the Kroger/Albertsons merger.

This article, which I shared in October last year, explains that it’s entirely possible the court will rule in favor of the Feds: https://www.supermarketnews.com/retail- ... cane-storm

One point is that C&S wants to license the Albertsons name in CA, AZ, CO, WY.

Speaking of C&S, this is a point from the WA AG lawsuit that will come back to haunt them: https://www.seattletimes.com/business/i ... se-stores/

““Do we have to say that we won’t close stores?” Bob Palmer, outgoing CEO of New Hampshire-based C&S Wholesale, asked last year about plans to buy the 413 locations, according to newly unredacted passages in the state’s suit.

In the passage, Palmer appears to concede that the stores will “stay open” during the sales process, “but then what?” he asks.

“Are we committed to this?”

Palmer’s questions are among numerous entries in the suit that had been redacted over concerns they contained proprietary information about Kroger, Albertsons or C&S Wholesale.”

[pseudo3d]

““Do we have to say that we won’t close stores?” Bob Palmer, outgoing CEO of New Hampshire-based C&S Wholesale, asked last year about plans to buy the 413 locations, according to newly unredacted passages in the state’s suit.

In the passage, Palmer appears to concede that the stores will “stay open” during the sales process, “but then what?” he asks.

“Are we committed to this?”

That definitely sounds like it would sink the deal.

My main piece of evidence is that they have neither executed an arrangement to buy more stores nor revealed where those stores were. A month before the deal between the deal between Albertsons and Safeway was finalized, the divested store locations were released to the public, we don't even have that yet.

[ClownLoach]

““Do we have to say that we won’t close stores?” Bob Palmer, outgoing CEO of New Hampshire-based C&S Wholesale, asked last year about plans to buy the 413 locations, according to newly unredacted passages in the state’s suit.

In the passage, Palmer appears to concede that the stores will “stay open” during the sales process, “but then what?” he asks.

“Are we committed to this?”

That definitely sounds like it would sink the deal.

My main piece of evidence is that they have neither executed an arrangement to buy more stores nor revealed where those stores were. A month before the deal between the deal between Albertsons and Safeway was finalized, the divested store locations were released to the public, we don't even have that yet.

They are obviously trying to keep the list close to the vest for three reasons: first, they know there will be outrage about the stores chosen for divestiture. Analysts in local areas will figure out that stores were chosen not because they're real overlaps but rather they're the sites that are less profitable, difficult to operate, in need of serious and costly remodeling, etc. A group of stores nobody could succeed in operating as a contiguous unit and make a profit. Crap stores. Put simply, the only stores they're voluntarily putting forward are going to be stores they otherwise would close on day one of the merger completing. The list will prove they're setting up C&S to fail, not become a vibrant new competitor.

Second, they will also be found to have not divested stores where it is needed out of the simple reason of greed. If it's a highly profitable store they will have kept it, overlap or not. Some of the odd behaviors seen like rebranding of some Albertsons companies stores will be revealed to have been done in collusion with Kroger to protect as many sales as possible once the stores that were selected for C&S are gone. Same for some of the odd remodeling, or lack of remodeling we have seen where one store is magically neglected while the other is on its second or third remodel. Obviously both sides have the list and are neglecting the divests while fixing up the keepers. The fact is that any store that actually needed to be divested for the purpose of monopoly prevention will not be on the list, and it won't get there until they are forced by the FTC or a State AG to sell said store.

And third, they know once the lists are out then there will be thousands of pissed off consumers who write their congressional representatives, state AG, the FTC etc. because maybe they didn't care before, but now that the nice Albertsons or Ralphs or whatever closest to their house is going to be sold to the C&S folks to quickly close a-la-Haggen they are coming with the pitchforks and torches. The loss of a supermarket actually is proven to lower property values. People are not going to accept it, and the enraged public will make it even easier for the FTC to block the deal. That is why they are keeping the list secret. They would have revealed it months ago if they didn't have something to hide.

[ClownLoach]

““Do we have to say that we won’t close stores?” Bob Palmer, outgoing CEO of New Hampshire-based C&S Wholesale, asked last year about plans to buy the 413 locations, according to newly unredacted passages in the state’s suit.

In the passage, Palmer appears to concede that the stores will “stay open” during the sales process, “but then what?” he asks.

“Are we committed to this?”

That definitely sounds like it would sink the deal.

My main piece of evidence is that they have neither executed an arrangement to buy more stores nor revealed where those stores were. A month before the deal between the deal between Albertsons and Safeway was finalized, the divested store locations were released to the public, we don't even have that yet.

Don't you think it's odd that another big executive is now leaving too, after the Kroger CFO, who could have easily been in line to be the next CEO in a few years? Why did C&S change the CEO? Maybe he realized he signed a sucker deal and it's going to implode the company, so he decided to hop on a golden parachute and get out so that someone else can deal with the mess?

If I had to guess, they're getting these stores at liquidation value or the price Hilco or someone else would pay in bankruptcy proceedings to wind them down. Why else would there even be a question so damning as "are we committed to this?" Obviously C&S has zero intention or interest to operate these stores as a real competitor. They are there to liquidate them in one form or another, either with a store closing sale or a cash sale to a local IGA, ethnic operator, etc. And thereby will be used as a conduit to break the union agreements with the workers in those stores.

I really have to wonder if they had bids from real, committed operators and they turned them down? Raleys? Save Mart? Stater Bros? Etc. I'll bet each wanted stores in their markets. But they want them to operate them, and Kroger/Albertsons want them to close.