🛒 Kroger-Albertsons Merger: National Impact

[storewanderer]

I haven't tested to see if Kroger assesses this cash back fee on Discover cash back too or if it is strictly on debit cards.

Discover prohibits merchants from charging a fee for this service.

While I don't like more fees, this is much cheaper than using a non-bank ATM, and low enough that people won't avoid Kroger because of it. If you go to, let's say Albertsons instead of Ralphs, your bill will probably increase by more than 75 cents.

That was their logic. It is cheaper than an ATM. It is still a rotten move as far as being "customer friendly" goes. I can understand the fee for large amounts ($101+) of cash back, or for someone who is requesting multiple cash back transactions in a day that accumulate to the "large amount" cap, but to charge a 75cent fee because someone requested $3 of quarters in cash back to do their laundry with, as the store is within walking distance from their apartment, is ridiculous. Another policy that hurts the most vulnerable customers the most.

I agree that the upper middle class customer who wants $100 cash back so they can go to a bar later to drink/gamble and use cash doesn't care about the cash back fee.

[pseudo3d]

Apparently the plan has been tweaked to add another Texas and Louisiana store to the list (doesn't say which one from what) as well as "increased distribution capacity, provisions for expanded transition services and an additional dairy facility."

https://973thedawg.com/ixp/36/p/kroger- ... na-stores/

[wnetmacman]

Apparently the plan has been tweaked to add another Texas and Louisiana store to the list (doesn't say which one from what) as well as "increased distribution capacity, provisions for expanded transition services and an additional dairy facility."

https://973thedawg.com/ixp/36/p/kroger- ... na-stores/

97.3 The Dawg is a Lafayette, LA station owned by Townsquare Media that is local to me; Townsquare owns about 8 radio stations in Lafayette. Their news is always a bit behind. I would bet that this is related to the previous adjustments last month that were made.

[ClownLoach]

I am still not 100% convinced that the mix in every market is being reported accurately since the major revision. This could be intentional to throw off competitors who may be trying to make Real Estate decisions.

I am not sold that 100% of California divestitures will be ACI stores (only Vons, Albertsons, Pavilions) and now no Kroger stores(Ralphs or Food4Less) when previously both companies were included. I'm still not convinced that F4L in California is not going to be moved to C&S.

Furthermore they would not be under any obligation to accurately state anything other than the store count itself.

I can see multiple locations where the Ralphs is much less desirable to keep than the adjacent Vons or Albertsons property, and if there was much of a sales volume difference where the Ralphs is superior they could easily rebrand the "kept" ACI store as a Ralphs and prioritize a remodel to "move" the Ralphs customers into the newer/larger/better facility. Furthermore as I've stated previously there are many commercial properties especially on the West Coast that are threatened with replacement by the landlords, and I would find it very hard to believe that not a single CA Kroger operated property is at risk of eviction and redevelopment which would make them a better choice for divestiture to a glorified liquidator like C&S who doesn't really care what they get.

There are clearly reasons why they're keeping the divestiture list secret, and being able to change instantly has to be one of them. For C&S they're basically acquiring these stores at $5M a piece which if immediately liquidated would likely return a decent profit once all inventory, equipment and fixtures are sold therefore they would have no reason to really care if say last minute the crummy old Ralphs was swapped in and a nicer newer Vons was kept and so forth.

Also don't forget that entire warehouses, offices and other facilities are being conveyed to C&S, so the value of $5M per store being paid is in reality far less, maybe just a couple million tops. C&S could easily put everything for sale, just run a massive liquidation sale for whatever isn't sold, pay any lease severance due to close facilities, and still walk away with several billion in profits for doing the dirty work for Kroger. Once you factor that in then you know C&S really doesn't care if they get a load of diamonds or a load of coal.

And if you're a competitor trying to figure out what the map is going to look like post merger (if heaven forbid it actually happens) then you could easily bet big and bet wrong on site selection. For example if you're Aldi and you're looking at a site near a Vons you suspect will be divested to the C&S operation that will have to rebrand it, is that a site you jump on now to be ready to capture customers who might leave? Or do you sit and wait to see if C&S acquires the Vons and then offers it for sale "dead or alive" which might be better than building a few blocks away? You could wait and be surprised as a Ralphs sign goes up on the Vons then you lose both opportunities. You could decide to build the new site and then the Vons becomes a Ralphs and the Ralphs across town goes to C&S as a surprise then closes, so it would have been a better opportunity to have pursued sites on the other side of town instead.

Don't think for a minute that these kind of competition scenarios aren't discussed ad nauseum in the Real Estate Asset Committees and such, even the NDA protected merger teams. They cannot make directly anticompetitive decisions like "the broker said Stater Bros is looking at the site across the street from that old Vons, let's dump it on C&S because they're going to kill us there." But they can choose to maintain the highest level of silence to ensure competitors don't have actionable merger information. That is why they're keeping it so secret versus past mergers where lists came out many months in advance. They know the more information they release, the sooner growing competitors can take action and make decisions. Slowing the information faucet to a trickle means slowing the growth of the competition which is advantageous to both companies merged or not. I have heard that there are development plans for mixed use projects that are basically at a standstill entirely because of this merger and the fact that nobody can act until the real estate outcomes are determined. The secrecy is a real problem, and it is a choice that they have made.

[veteran+]

I wonder if they are trying to exhaust the system (a la Roy Cohn style) until the government gives up or there is a change in D.C. come November.

Thinking out loud and not intending to get political.

[storewanderer]

At some point someone blinks. I don't think they have until November. They need to move on. This can't stay tied up forever. The two companies can't stay in limbo forever.

Let's see how earnings/profits with both companies are in the coming 3 months. I think the opportunity for someone to "blink" may come with bad earnings blamed on inflation/merger uncertainty/"pressured consumer"/cuts in food stamps/whatever.

But what happens then. Does C&S buy Albertsons as a whole?

Do we see a restructured deal where Kroger takes non-overlapping assets and C&S gets the rest (that sure would smell like the Supervalu/Cerberus Albertsons carve up all over again)...

I don't think the deal in its current form being canceled represents the end of a deal. Unless Kroger seriously falters. Which when I look at how they run things, feel could happen at any time.

[ClownLoach]

At some point someone blinks. I don't think they have until November. They need to move on. This can't stay tied up forever. The two companies can't stay in limbo forever.

Let's see how earnings/profits with both companies are in the coming 3 months. I think the opportunity for someone to "blink" may come with bad earnings blamed on inflation/merger uncertainty/"pressured consumer"/cuts in food stamps/whatever.

But what happens then. Does C&S buy Albertsons as a whole?

Do we see a restructured deal where Kroger takes non-overlapping assets and C&S gets the rest (that sure would smell like the Supervalu/Cerberus Albertsons carve up all over again)...

I don't think the deal in its current form being canceled represents the end of a deal. Unless Kroger seriously falters. Which when I look at how they run things, feel could happen at any time.

I do not see C&S being involved in any deal to acquire anything but cast offs. They are not a long term operator and I do not see them changing. That is the entire criticism of their involvement in this deal where they are acquiring stores and facilities at basically below liquidation value. They have little incentive right now to do anything but hire Hilco, Gordon Brothers, Great American, etc. as soon as they take the keys.

I think Kroger has to find ways to grow more slowly so they don't attract this level of attention. C&S could assist with they if they are handed some offloads from Albertsons and "flip" them to Kroger. But I think they continue to grow the way they have, acquiring one local or regional chain at a time.

Obviously Albertsons is going to go in another transaction but C&S is not going to be a buyer as they couldn't possibly scrape together a similar purchase price over $20 Billion. I am not sure who would be a buyer, but I still could see a transaction where Amazon offloads the Whole Foods/Fresh operations entirely in a fire sale transaction and ACI acquires it to bulk up and add shareholder value. I know Just Walk Out didn't work, but I also question if its removal is a way of further disentangling Amazon from those stores to better facilitate an asset sale at the opportune time. I could also see Apollo offering to buy out Cerberus' shares and take the company private. They could also accomplish both an acquisition of Whole Foods/Fresh and taking the combined entity private.

Interestingly I don't believe there is going to be any difference on the political front because this is going to wind up in the hands of the Supreme Court once an injunction is granted (which I see as inevitable, there are too many different courts involved and all it really takes is one). The Supreme Court is going to do one of two things, uphold the injunction or remand it to the previous court (thereby upholding it). I see zero chance of the companies being able to show any compelling reason why they would be imminently harmed by an injunction (neither one would be at risk of insolvency for example even with the dividend deal at ACI). That injunction would force an immediate halt to any of the NDA merger integration planning groups, it would likely void the C&S deal, basically an injunction stops and ceases all merger related activities until the trial is completed. Once the government has an injunction they could drag out proceedings for years and years for dubious reasons which would not be palatable to Cerberus who just wants to cash out.

[pseudo3d]

At some point someone blinks. I don't think they have until November. They need to move on. This can't stay tied up forever. The two companies can't stay in limbo forever.

Let's see how earnings/profits with both companies are in the coming 3 months. I think the opportunity for someone to "blink" may come with bad earnings blamed on inflation/merger uncertainty/"pressured consumer"/cuts in food stamps/whatever.

But what happens then. Does C&S buy Albertsons as a whole?

Do we see a restructured deal where Kroger takes non-overlapping assets and C&S gets the rest (that sure would smell like the Supervalu/Cerberus Albertsons carve up all over again)...

I don't think the deal in its current form being canceled represents the end of a deal. Unless Kroger seriously falters. Which when I look at how they run things, feel could happen at any time.

I do not see C&S being involved in any deal to acquire anything but cast offs. They are not a long term operator and I do not see them changing. That is the entire criticism of their involvement in this deal where they are acquiring stores and facilities at basically below liquidation value. They have little incentive right now to do anything but hire Hilco, Gordon Brothers, Great American, etc. as soon as they take the keys.

I think Kroger has to find ways to grow more slowly so they don't attract this level of attention. C&S could assist with they if they are handed some offloads from Albertsons and "flip" them to Kroger. But I think they continue to grow the way they have, acquiring one local or regional chain at a time.

Obviously Albertsons is going to go in another transaction but C&S is not going to be a buyer as they couldn't possibly scrape together a similar purchase price over $20 Billion. I am not sure who would be a buyer, but I still could see a transaction where Amazon offloads the Whole Foods/Fresh operations entirely in a fire sale transaction and ACI acquires it to bulk up and add shareholder value. I know Just Walk Out didn't work, but I also question if its removal is a way of further disentangling Amazon from those stores to better facilitate an asset sale at the opportune time. I could also see Apollo offering to buy out Cerberus' shares and take the company private. They could also accomplish both an acquisition of Whole Foods/Fresh and taking the combined entity private.

Interestingly I don't believe there is going to be any difference on the political front because this is going to wind up in the hands of the Supreme Court once an injunction is granted (which I see as inevitable, there are too many different courts involved and all it really takes is one). The Supreme Court is going to do one of two things, uphold the injunction or remand it to the previous court (thereby upholding it). I see zero chance of the companies being able to show any compelling reason why they would be imminently harmed by an injunction (neither one would be at risk of insolvency for example even with the dividend deal at ACI). That injunction would force an immediate halt to any of the NDA merger integration planning groups, it would likely void the C&S deal, basically an injunction stops and ceases all merger related activities until the trial is completed. Once the government has an injunction they could drag out proceedings for years and years for dubious reasons which would not be palatable to Cerberus who just wants to cash out.

I noticed Apollo is now involved in the Sony/Paramount Global merger, which indicates that they may be losing interest in the Kroger/Albertsons merger (also the similarity in purchase costs--$25B...are you telling me that Paramount Global is worth only $400M more than Albertsons is?)

[SamSpade]

Not that it matters, but I was served my first online ad in a TV program ("OTT" in industry speak) for how hard the associates at both Kroger and Albertsons Co's. work and that the merger would be best for them. Then it led to the merger website we've posted here previously. I believe it named Fred Meyer specifically in the V/O script as (in theory) people may not know what Kroger is.

[ClownLoach]

At some point someone blinks. I don't think they have until November. They need to move on. This can't stay tied up forever. The two companies can't stay in limbo forever.

Let's see how earnings/profits with both companies are in the coming 3 months. I think the opportunity for someone to "blink" may come with bad earnings blamed on inflation/merger uncertainty/"pressured consumer"/cuts in food stamps/whatever.

But what happens then. Does C&S buy Albertsons as a whole?

Do we see a restructured deal where Kroger takes non-overlapping assets and C&S gets the rest (that sure would smell like the Supervalu/Cerberus Albertsons carve up all over again)...

I don't think the deal in its current form being canceled represents the end of a deal. Unless Kroger seriously falters. Which when I look at how they run things, feel could happen at any time.

I do not see C&S being involved in any deal to acquire anything but cast offs. They are not a long term operator and I do not see them changing. That is the entire criticism of their involvement in this deal where they are acquiring stores and facilities at basically below liquidation value. They have little incentive right now to do anything but hire Hilco, Gordon Brothers, Great American, etc. as soon as they take the keys.

I think Kroger has to find ways to grow more slowly so they don't attract this level of attention. C&S could assist with they if they are handed some offloads from Albertsons and "flip" them to Kroger. But I think they continue to grow the way they have, acquiring one local or regional chain at a time.

Obviously Albertsons is going to go in another transaction but C&S is not going to be a buyer as they couldn't possibly scrape together a similar purchase price over $20 Billion. I am not sure who would be a buyer, but I still could see a transaction where Amazon offloads the Whole Foods/Fresh operations entirely in a fire sale transaction and ACI acquires it to bulk up and add shareholder value. I know Just Walk Out didn't work, but I also question if its removal is a way of further disentangling Amazon from those stores to better facilitate an asset sale at the opportune time. I could also see Apollo offering to buy out Cerberus' shares and take the company private. They could also accomplish both an acquisition of Whole Foods/Fresh and taking the combined entity private.

Interestingly I don't believe there is going to be any difference on the political front because this is going to wind up in the hands of the Supreme Court once an injunction is granted (which I see as inevitable, there are too many different courts involved and all it really takes is one). The Supreme Court is going to do one of two things, uphold the injunction or remand it to the previous court (thereby upholding it). I see zero chance of the companies being able to show any compelling reason why they would be imminently harmed by an injunction (neither one would be at risk of insolvency for example even with the dividend deal at ACI). That injunction would force an immediate halt to any of the NDA merger integration planning groups, it would likely void the C&S deal, basically an injunction stops and ceases all merger related activities until the trial is completed. Once the government has an injunction they could drag out proceedings for years and years for dubious reasons which would not be palatable to Cerberus who just wants to cash out.

I noticed Apollo is now involved in the Sony/Paramount Global merger, which indicates that they may be losing interest in the Kroger/Albertsons merger (also the similarity in purchase costs--$25B...are you telling me that Paramount Global is worth only $400M more than Albertsons is?)

Paramount (which includes all of CBS) is a steal at that price. Wall Street seems to have convinced themselves that these studios and networks are worthless but Netflix which is the same thing with less assets is worth ungodly amounts of money. None of the prices are rational and obviously the values of the assets individually are more than the purchase price which might be what kills this if Ms. Redstone doesn't accept any offers. Apollo should give up on Albertsons (which somehow I believe would immediately kill the merger deal) and raise their bid to successfully buy Paramount instead.