🛒 Kroger-Albertsons Merger: National Impact

[CalItalian]

Scoop: FTC unlikely to weigh in on Kroger-Albertsons before February

https://www.axios.com/pro/retail-deals/ ... =editorial

[ClownLoach]

If they're still in talks with the FTC and they're not talking about closing it out soon then they may close it out within the week. If they released another list of 200 stores to divest to C&S I'd be much less optimistic.

C&S passing on the second set makes me think that should the merger fall through they won't buy Albertsons (they would probably deal with some sort of divestments themselves).

With Amazon Fresh crumbling and Amazon still on the hook to buying products from SpartanNash I could see some arrangement of some sort of unholy Albertsons/SpartanNash merger that Amazon holds a stake in.

I am curious what you are referring to about C&S passing on the second set?

Based on the initial C&S purchase agreement it appeared they had already agreed to purchase the second set of stores?

Based on everything already communicated C&S is already contracted to purchase every required divest up to the merger limit of 650. If it goes over 650 then Kroger's cost per actually acquired store is so astronomical they shouldn't bother (since C&S is buying each store super cheap)... Which is why that's their "out" in the deal without paying a break up fee.

That's where I think the fireworks begin. I think Kroger will renegotiate at that point and the price will drop substantially. Then it gets interesting if ACI shareholders demand to drop out.

I think Washington State is irreparable and that torpedoes this deal.

[storewanderer]

Based on everything already communicated C&S is already contracted to purchase every required divest up to the merger limit of 650. If it goes over 650 then Kroger's cost per actually acquired store is so astronomical they shouldn't bother (since C&S is buying each store super cheap)... Which is why that's their "out" in the deal without paying a break up fee.

That's where I think the fireworks begin. I think Kroger will renegotiate at that point and the price will drop substantially. Then it gets interesting if ACI shareholders demand to drop out.

The store count divested is somewhat arbitrary. Like, you divest 50 QFCs in Seattle area or you divest 8 Fred Meyers in that area (probably same volume ends up divested under either of those scenarios). Obviously one scenario gets you a lot closer to 650 stores than the other scenario. Previously it was already confirmed that they are NOT divesting ANY Fred Meyer, Smiths, Frys, or King Soopers Stores. But with additional divests added could that plan change?

It will be interesting to see what shakes out here. Best case for all involved is for this merger to die, now, quietly, and everyone go their separate ways and go about their business. Save the corporate's money fighting it and save the government resources fighting it.

[ClownLoach]

I am going to slightly disagree about divestitures to Stater Brothers being negative to competition in the broad IE. On the whole, yes, they are fully deployed in the IE, but just a little east of there in the Coachella Valley, they have no coverage in the submarkets along 111 (essentially no stores south of Ramon Road until you get out to Indio).


Breaking up the cozy little triopoly in south Palm Springs (Vons Rimcrest, Ralphs Sunrise, Ralphs Smoke Tree) would be a plus for competition (even though they have a location 3 miles north at Sunrise/Vista Chino)

In the areas where Albertsons is strongest in the IE Stater has holes in their network of stores. They're only saturated in San Bernardino County where Ralphs is virtually non existing and Albertsons is weak. Many Stater gaps in Riverside County where it appears they're second place to Albertsons. They could easily buy dozens of stores in Riverside and bring new competition to areas they don't serve.

[ClownLoach]

Based on everything already communicated C&S is already contracted to purchase every required divest up to the merger limit of 650. If it goes over 650 then Kroger's cost per actually acquired store is so astronomical they shouldn't bother (since C&S is buying each store super cheap)... Which is why that's their "out" in the deal without paying a break up fee.

That's where I think the fireworks begin. I think Kroger will renegotiate at that point and the price will drop substantially. Then it gets interesting if ACI shareholders demand to drop out.

The store count divested is somewhat arbitrary. Like, you divest 50 QFCs in Seattle area or you divest 8 Fred Meyers in that area (probably same volume ends up divested under either of those scenarios). Obviously one scenario gets you a lot closer to 650 stores than the other scenario. Previously it was already confirmed that they are NOT divesting ANY Fred Meyer, Smiths, Frys, or King Soopers Stores. But with additional divests added could that plan change?

It will be interesting to see what shakes out here. Best case for all involved is for this merger to die, now, quietly, and everyone go their separate ways and go about their business. Save the corporate's money fighting it and save the government resources fighting it.

No way C&S tries to run a Fred Meyer size box. It will be out of business in weeks. They don't know how to merchandise it and everyone knows that including the FTC. And since the FTC only thinks in terms of maps they're not going to say "get rid of 6 Safeway or substitute 1 Fred Meyer in this neighborhood," they're still going to want the 6 Safeways sold. Fact is that C&S up north will run just like Haggen California did, right into the ground if they tried to run those megastore formats.

The greatest irony: if Albertsons hadn't bought Haggen out of bankruptcy, then they would be an ideal divest partner for Washington State even if they had to increase in size 4X or more since they understand the market. But it sounds like they did far more destruction of the Haggen operations and brand than I had expected to see, and basically made it a Safeway with a different sign. That won't work. Oops!

I firmly believe that if Kroger digs in their heels and tries to fight it then they're going to find themselves in the unpleasant position of acquiring activist shareholders (like the problem Disney has currently) who will push for change, stopping the merger, board seats, and Rodney's head on a plate.

[CalItalian]

I am going to slightly disagree about divestitures to Stater Brothers being negative to competition in the broad IE. On the whole, yes, they are fully deployed in the IE, but just a little east of there in the Coachella Valley, they have no coverage in the submarkets along 111 (essentially no stores south of Ramon Road until you get out to Indio).


Breaking up the cozy little triopoly in south Palm Springs (Vons Rimcrest, Ralphs Sunrise, Ralphs Smoke Tree) would be a plus for competition (even though they have a location 3 miles north at Sunrise/Vista Chino)

In the areas where Albertsons is strongest in the IE Stater has holes in their network of stores. They're only saturated in San Bernardino County where Ralphs is virtually non existing and Albertsons is weak. Many Stater gaps in Riverside County where it appears they're second place to Albertsons. They could easily buy dozens of stores in Riverside and bring new competition to areas they don't serve.

That's the biggest laugh I had all day. Stater Bros. SATURATES Riverside County. Do you think 4 stores in Menifee is enough (Sun City is part of the City of Menifee and one new Stater Bros. is about to start construction in the Northeast portion of the city).

[CalItalian]

Yet the FTC has indeed allowed a lot of other silliness over the last two decades that has not been allowed before. I would wait before you automatically write this one off. I know it would create a giant monster, but the government loves giant monsters these days.

I work for the government. I already know. Note what I said about negotiating a later date was announced in an Axios scoop this afternoon.

Hopefully what happens here is it isn't just WA that will sue to block it but multiple states will join together and sue to block it.

Is there any benefit to the states waiting for a FTC decision vs. announcing now they will sue?

These two should just call this merger off and not deal with all of this. Is it really worth it to push through what is a poor merger? I thought Kroger had pretty strong common sense. Maybe they are too contractually obligated to exercise their typical behavior.

At this point it will benefit both parties to call this off. Albertsons has been doing better and is on a good trajectory to continue doing what it has done the past couple years and slowly grow its company again. I think it is a $35+ stock the day this merger gets called off. Kroger is an operational mess and needs to get some standards back into their stores, I don't think they are in a good position to deal with a merger and all of the integration.

Washington lawsuit is going to be filed in state court.
It stops Kroger & Albertsons trying to go rogue and close the deal.

As I have previously posted, there will be multiple states filing lawsuits. Some with the FTC in Federal Court and some in their own state courts.

That will tie this thing up past Election Day 2024 (a main objective of the FTC) & probably well beyond.

[ClownLoach]

I am going to slightly disagree about divestitures to Stater Brothers being negative to competition in the broad IE. On the whole, yes, they are fully deployed in the IE, but just a little east of there in the Coachella Valley, they have no coverage in the submarkets along 111 (essentially no stores south of Ramon Road until you get out to Indio).


Breaking up the cozy little triopoly in south Palm Springs (Vons Rimcrest, Ralphs Sunrise, Ralphs Smoke Tree) would be a plus for competition (even though they have a location 3 miles north at Sunrise/Vista Chino)

In the areas where Albertsons is strongest in the IE Stater has holes in their network of stores. They're only saturated in San Bernardino County where Ralphs is virtually non existing and Albertsons is weak. Many Stater gaps in Riverside County where it appears they're second place to Albertsons. They could easily buy dozens of stores in Riverside and bring new competition to areas they don't serve.

That's the biggest laugh I had all day. Stater Bros. SATURATES Riverside County. Do you think 4 stores in Menifee is enough (Sun City is part of the City of Menifee and one new Stater Bros. is about to start construction in the Northeast portion of the city).

Just looking at their own store locator, yes there are plenty of holes in it. There are gaps all along I-15 all the way through Temecula (where Albertsons has a 2 to 1 store ratio in the entire valley for example). Are there some areas where there's concentration? Sure. But there are plenty of spots where they could add a store and it would be of benefit from a competitive standpoint. They also have a lot of older stores that are not very competitive due to limited assortment and offerings which could be upgraded through store acquisitions of divestitures, and they are good about making their sites available to others instead of sitting and paying dead rent.

Menifee is odd. Am I correct there is only one ACI store (Vons in Sun City)? So everyone decided to ignore a city that's growing double digits annually and is up in population 30% since January 1, 2020... Except Stater. The fact they're going to dominate that little pocket is the fault of ACI and KR who don't invest in California anymore. But there's definitely a need, since the lack of grocery stores there drove the Menifee SuperTarget to be the #1 unit in the state and the #5 Target in the entire country...

For example Stater has big opportunities. One store in Temecula? Two stores in Murrieta? (both cities larger than Menifee). While Albertsons-Vons has 8 in the same area, which will be 10 if they merge with Kroger? 10 to 3 and you don't think it would be better if that was say 8 to 5 or 7 to 6?

[CalItalian]

In the areas where Albertsons is strongest in the IE Stater has holes in their network of stores. They're only saturated in San Bernardino County where Ralphs is virtually non existing and Albertsons is weak. Many Stater gaps in Riverside County where it appears they're second place to Albertsons. They could easily buy dozens of stores in Riverside and bring new competition to areas they don't serve.

That's the biggest laugh I had all day. Stater Bros. SATURATES Riverside County. Do you think 4 stores in Menifee is enough (Sun City is part of the City of Menifee and one new Stater Bros. is about to start construction in the Northeast portion of the city).

Just looking at their own store locator, yes there are plenty of holes in it. There are gaps all along I-15 all the way through Temecula (where Albertsons has a 2 to 1 store ratio in the entire valley for example). Are there some areas where there's concentration? Sure. But there are plenty of spots where they could add a store and it would be of benefit from a competitive standpoint. They also have a lot of older stores that are not very competitive due to limited assortment and offerings which could be upgraded through store acquisitions of divestitures, and they are good about making their sites available to others instead of sitting and paying dead rent.

Menifee is odd. Am I correct there is only one ACI store (Vons in Sun City)? So everyone decided to ignore a city that's growing double digits annually and is up in population 30% since January 1, 2020... Except Stater. The fact they're going to dominate that little pocket is the fault of ACI and KR who don't invest in California anymore. But there's definitely a need, since the lack of grocery stores there drove the Menifee SuperTarget to be the #1 unit in the state and the #5 Target in the entire country...

For example Stater has big opportunities. One store in Temecula? Two stores in Murrieta? (both cities larger than Menifee). While Albertsons-Vons has 8 in the same area, which will be 10 if they merge with Kroger? 10 to 3 and you don't think it would be better if that was say 8 to 5 or 7 to 6?

#1 You should learn more about population density along I-15. You clearly do not. From Lake Elsinore to Temescal Valley there isn't much. But a new shopping center with an anchor supermarket is planned for a future development near Vons Temescal Valley.
#2 You should learn where planned Stater Bros. stores are going to be located. One will be in a new planned development and shopping complex in North Murrieta just south of the Scott Rd. adjacent Albertsons off I-215. Just south of Menifee city limit. That's in addition to the Stater Bros. going in NE Menifee less than two miles from another Menifee Stater Bros.
#3 You should learn population growth. Menifee is now larger than Temecula and will surpass Murrieta in 2024.

There's 3 Stater Bros. in Hemet and nothing else.
Lake Elsinore has 3 Stater Bros. and 1 Albertsons, no Ralphs.

So far you've come up with one city, Temecula.
And Stater Bros. passed on purchasing either the Vons or Albertsons in Murrieta across the road from each other during that merger. Trader Joes is coming to Murrieta (just north of the Temecula city limit) and wants a Menifee location but there are no open storefronts (ex-closed Rite Aid adjacent Stater Bros.) to be had.

[storewanderer]

Washington lawsuit is going to be filed in state court.
It stops Kroger & Albertsons trying to go rogue and close the deal.

As I have previously posted, there will be multiple states filing lawsuits. Some with the FTC in Federal Court and some in their own state courts.

That will tie this thing up past Election Day 2024 (a main objective of the FTC) & probably well beyond.

Good. That is exactly what needs to happen. I am glad WA is back in action, it appeared they had gone quiet. This has major impacts competitively in that state so it is perfectly appropriate for them to file it.

I don't think this is going to be tied up past Election Day even if some politicians may hope so. I think the companies will mutually agree to abandon the merger effort long before then. I'm also going to be very curious how Kroger's upcoming earnings reports are.

Meanwhile Kroger/Albertsons say those opposing the merger are just trying to help non-union competitors such as Amazon/Wal Mart. Wow, really? Amazon is losing food sales... Wal Mart isn't opening new stores in the US much at all anymore... I hope the FTC isn't misinformed enough to buy these weak arguments. Hopefully the unions will help get accurate information to the FTC since there is a lot on the line for the unions.