So... They spend $25 billion dollars to shrink the company? What a deal! Not going to happen. Productivity outside of California at these Kroger stores is superior to Albertsons. They're going to ask to divest Albertsons properties for the most part, not their own.bryceleinan wrote: ↑March 27th, 2024, 7:56 pm I still think they have this backwards out west… SpinCo based on Fred Meyer/Smith’s/Ralph’s/Fry’s/King Soopers would probably be the best thing. I’m not quite sure what they do in Utah and Montana though - possibly keep the Smith’s name there? In this scenario, Kroger gets all the Safeway locations, and operates pure grocery. Marketplace stores could theoretically go to SpinCo.
It is clear the critical hang up with the authorities is the quality of the purchaser of the divestitures, not so much the quantity of stores. The government is more concerned about the stores staying open and competitive. That makes me believe C&S is out completely as nobody takes them seriously and the statements of the CEO make such a stink they cannot recover credibility ("Should we say we are going to keep them open? Do we have to commit to running these?") C&S was getting these stores at liquidation value, pretty much what Hilco or Great American would pay for the right to close them. They could have taken the keys and started going out of business sales immediately, nobody could stop them and they'd probably make a profit on the shutdown.
Spinco was a preposterous idea that makes even less sense than the C&S deal. If the government thinks C&S isn't enough of a proven and experienced owner, what exactly would Spinco bring, a company that doesn't even exist yet? Why would anybody trust Kroger would cast off their best and brightest leaders to form Spinco, the new Titanic of grocery-specific retail. They would spin off the worst stores and the worst employees with the worst performance track record to run Spinco into the ground. And please don't start the whole "they'll make Spinco and XYZ Foods will buy the company!" because no competitor is going to pay more for these stores than what they would have sold for in the C&S sweetheart deal... Fact is Kroger needs them to buy more than they need to buy Kroger's merger castoffs. I expect some of these stores to go for as little as a dollar to the most shrewd operators.
There is no merger, period, unless the authorities are satisfied with the QUALITY and EXPERIENCE LEVEL of the buyers of these divestitures. That means they can't try to pawn off these stores to a loser like C&S, and they have to actually sell them to real competitors who fully intend to operate them and do everything in their power to kick Kroger's butt.
I expect to see some experienced operator(s) emerge as the new buyers of these divestitures. Stater and Raley's in California/Nevada/Arizona. Not sure who in Washington and Oregon but maybe someone wants to come out West or Raley's wants a chance at going North with a bargain entry "once in a lifetime discount."
Furthermore, I would not be surprised if Kroger tries their hand at working with the feds and most aggressive states to potentially sell FEWER stores than their initial plans even if they might be forced to sell a few crown jewels. Remember that anything they were selling to C&S was a unwanted store, not a store that would necessarily require divestiture. They might be better off entirely by working with the authorities instead of trying to work around them.