Kroger to merge with Albertsons?

[babs]

I don't see this going well in the Pacific Northwest. Safeway is in many towns big and small, and they, along with Albertsons and Haggen, operate in close proximity to Fred Meyer and QFC locations.

Could Fred Meyer be spun off to Target or Walmart? Or will this be another scenario where they unload stores to a chain that can't handle them and they end up getting stores back like the Albertsons/Haggen disaster? If there are multiple banners under the same ownership in one market, nobody wins. This merger would combine up to five brands in any given area.

Fred Meyer is large enough to be spun out on its own as an IPO.

Regardless, this merger isn't happening. Kroger has had so many other opportunities to grow. Buying Publix, Cub, Wegmans etc. Either they lost their minds or idiots now run Kroger. What makes them think the FTC would go for this especially in the food biz at a time when people are struggling to buy food. All this merger does is raise prices. It's a no go.

The days of nearly 0% cash are over. Raising cash for spinoffs won't be easy - and get harder everyday.
Grocery isn't a big growth sector that attracts a lot of cash.

You could essentially reconstruct the Fred Meyer empire before the merger with Kroger by spinning off most of the west coast stores. But with the market in the toilet and better uses for cash, that's a hard sell. I still think the boys in Cincinnati has lost their mind. There is no way the FTC approved this.

[mjhale]

Maybe the stores will collectively be cheap enough and get Ahold Delhaize's attention - haven't they wanted to get rid of the US operations?

Ahold's accounting scandal in the early 2000s hobbled the company for a while and I think made them leery of growing. I'm still a bit surprised about the deal with Delhaize because they got a whole slew of Food Lion stores which seem incompatible with the general Ahold operation. Hannaford is the only thing that came in that deal that is similar to Ahold's existing operations.

Outside of the merger with Delhaize, Ahold has not had good luck outside its core Giant-PA/Giant-MD/Stop and Shop operations. Bi-Lo, Brunos, Tops and the former Ukrops stores in Richmond, VA have all been sold off or closed for one reason or another. I could see Ahold being interested in stores here and there to firm up Giant-MD operations, mostly replacing older or smaller stores or to move to more advantageous locations. Giant-MD purchased several former Shoppers locations for this purpose when Supervalu was offloading them. Beyond that it doesn't seem like Ahold is keen on expanding unless there is something going on very behind the scenes. If Ahold did jump at any potentially divested stores outside their core area they'd end up like Safeway with the bulk of their operations in one area but outposts elsewhere. I'm not sure that is the best way to go and that already failed for Ahold when they were in the Carolinas.

[mjhale]

I'll add to the chorus of people saying that the FTC should block this deal. This deal removes a viable (and only in places) competitor in a big part of the country. Also who is going to buy the divested stores? The only other major multi-chain traditional grocer is Ahold-Delhaize. Could they handle a huge amount of additional stores? Or really are they even interested if they aren't already a part of the deal and we don't know it yet? The regionals like Publix, HEB or Wegmans aren't likely to want to be forced into buying large numbers of stores or entire divisions just to get a few stores that they really want. And we've seen what happens to management buyouts of divisions. They wither away over time. Think Appletree in Texas.

Thinking specifically about the DC/Baltimore region if this crazy deal goes through, the question will be who between Safeway and Harris-Teeter stays or if it will be a combination of the two and what banner will the collective stores be run under. Safeway in the DC area has its genesis in the Sanitary stores that Safeway purchased in the 1930s. Safeway has the longevity but has inconsistent stores, very average operations and high prices. Harris Teeter seems to attract the more affluent demographics and has clean, attractive stores. Pricing is high for they offer which isn't anything in my mind that justifies the cost. I could see Giant-MD be interested in stores here and there for replacements or relocations. Also, if UNFI is really trying to bring back Shoppers maybe they would want some stores for that purpose. The wildcard is Publix. They have been long rumored to be interested in the DC market. I believe that Harris-Teeter is non-union. Would Publix be interested in Harris Teeter as a whole group or a substantial part? The Publix entry into Richmond was by way of the former Ukrops turned Martins stores that Ahold unloaded. So a Publix entry into DC by way of acquisition wouldn't be out of the norm here. Of course this merger has to go through first. I don't see much smooth sailing for a merger like this during a time of high food costs and general high inflation.

[pseudo3d]

Its not just the effect on consumers and stores, how is Kroger going to pay for this? They've almost got as much debt as Albertsons does ($11.7B as of May of this year) and only $1.38B on hand, and Albertsons paid $10B for Safeway. With the combined company and its stockholders, the pricetag is going to be $10B. Selling the "loser" divisions and stores will no way come close to recouping that. Now Kroger will be $20B+ in the hole with no room to improve. They've lost it, I hope that shareholders of both companies tell them to screw off.

[CalItalian]

Its not just the effect on consumers and stores, how is Kroger going to pay for this? They've almost got as much debt as Albertsons does ($11.7B as of May of this year) and only $1.38B on hand, and Albertsons paid $10B for Safeway. With the combined company and its stockholders, the pricetag is going to be $10B. Selling the "loser" divisions and stores will no way come close to recouping that. Now Kroger will be $20B+ in the hole with no room to improve. They've lost it, I hope that shareholders of both companies tell them to screw off.

$25 billion is the rumored amount. https://seekingalpha.com/news/3891276-k ... ion-report

[pseudo3d]

Its not just the effect on consumers and stores, how is Kroger going to pay for this? They've almost got as much debt as Albertsons does ($11.7B as of May of this year) and only $1.38B on hand, and Albertsons paid $10B for Safeway. With the combined company and its stockholders, the pricetag is going to be $10B. Selling the "loser" divisions and stores will no way come close to recouping that. Now Kroger will be $20B+ in the hole with no room to improve. They've lost it, I hope that shareholders of both companies tell them to screw off.

$25 billion is the rumored amount. https://seekingalpha.com/news/3891276-k ... ion-report

Meant to say AT LEAST $10B.

[storewanderer]

I've thought more about this deal. Without repeating much of what has already been said I am trying to figure out WHAT is possibly positive about this deal to the consumer...

Albertsons has some debt that will come due in the next few years and the high interest rates will kill them. Some variable rate stuff, etc. They are up against a wall and it appears they have decided they must dissolve their company. I have no clue what Kroger is thinking- they must think they can become too big to fail or something.

I can't come up with much of anything here that will help the consumer. This just seems like a terrible merger.

Side note, Staples and Office Depot merger keeps getting blocked due to all of the government purchasing contracts that are established with both chains (and I think the wholesale part of Staples and/or Office Depot that services those contracts is separated from the retail part, but these politicians and regulators don't seem to know that).

What it comes down to is Albertsons has obviously failed, AGAIN. Rather than fix their operation they are wanting the easy way out, AGAIN. And their plan is going to basically lead to a break up/split up that will likely seem very similar to 2006, AGAIN. Of course following the path of Safeway they failed... how could following the footsteps of a chain that failed have worked? As the old Albertsons LLC slogan went "new ideas at work" - that is what they needed. NOT Safeway ideas.

My guess is this time, Kroger is the Supervalu (taking the so called "better" assets- the ones that don't already compete with Kroger). What happens to the supposedly poor assets (the ones that already compete with Kroger, largely)... is anyone's guess. Though we have a new twist this time of what I'd call "so so" assets (such as the Southwest division or the Seattle division) that compete with Kroger and will need to be divested.

The union and politicians can cry all they want. They can speak out against the merger. If the company wants to sell that bad, it will only get worse. What if the company takes one of those poor performing divisions and announces a Dominick's or a Genuardi's (everyone is fired, fast forward a few years and multiple stores sold to/reopened by non-union operators) and says well since we couldn't complete the merger we have to cease operations of poorly performing assets, had we completed the merger thousands of Union jobs would have been saved.

I have little confidence in FTC under Biden Administration, or any other administration in the past 20 years. Heck, remember 7-Eleven and Speedway completed their merger WITHOUT FTC approval... basically picked what they wanted to divest, did their merger, told FTC to pound sand. FTC ultimately said case closed.

[HCal]

I've thought more about this deal. Without repeating much of what has already been said I am trying to figure out WHAT is possibly positive about this deal to the consumer...

Albertsons has some debt that will come due in the next few years and the high interest rates will kill them. Some variable rate stuff, etc. They are up against a wall and it appears they have decided they must dissolve their company. I have no clue what Kroger is thinking- they must think they can become too big to fail or something.

I think Kroger's goal is to get into the markets that they currently lack: the northeastern US, NorCal and Hawaii. They want to be a true nationwide operator. Why, I have no idea. But it's probably one of the few ways they can continue to grow and increase profitability at this stage. Building new stores isn't practical, and there aren't a lot of regional chains that would make good acquisition targets.

But I guess it will all come down to the price. If Albertsons is willing to sell for cheap, it may make sense for Kroger.

I can't come up with much of anything here that will help the consumer. This just seems like a terrible merger.

From the perspective of the consumer, most mergers are terrible.

What it comes down to is Albertsons has obviously failed, AGAIN. Rather than fix their operation they are wanting the easy way out, AGAIN. And their plan is going to basically lead to a break up/split up that will likely seem very similar to 2006, AGAIN. Of course following the path of Safeway they failed... how could following the footsteps of a chain that failed have worked? As the old Albertsons LLC slogan went "new ideas at work" - that is what they needed. NOT Safeway ideas.

I have no idea why Albertsons bought Safeway in the first place. This led to a huge debt load that they have yet to recover from. I'm sure some synergies resulted, but how much? You can't get into debt and then pay it off by growing sales, it usually doesn't work like that in retail.

[cw06]

My takes on this:

Kroger will most likely have to divest stores on the West Coast where Kroger owned stores and Albertsons owned stores are the only game in town.

The wild card is what they'll do in areas where they have overlapping store brands but won't be a monopoly. I'm thinking places like VA/DC/MD where you'll have Kroger, Harris Teeter, and Safeway. Will they keep having trucks criss-crossing each other, or will all Safeways become Harris Teeters (or vice versa)? And what about things like Balducci's who have random delis in hospitals and airports?

As to why Kroger is making this purchase? It's been pretty obvious for a while that they want to become a national retailer on par with Walmart (and Target). Look at how they're building those Ocado warehouses to serve areas they don't have a presence. This purchase lets them enter the Northeast and remainder of the Mid-Atlantic with a turnkey operation.

As for the consumer, I don't see any benefit to this. Prices probably won't change, and (lack of) quality will stay as it always was. This is really about large corporations trying to keep up with the changing workforce and make even more money.

[CalItalian]

It's on. $24.6 Billion
https://www.nbclosangeles.com/news/busi ... n/3007679/