Kroger has updated its proposed plan to divest hundreds of stores to C&S Wholesale Grocers in an effort to appease federal regulators who have sued to block the grocer’s $24.6 billion merger with Albertsons.
Kroger’s new plan adds 166 more stores to the original divestiture proposal, bringing the total number of divested stores to 579. That includes selling banners QFC, Mariano’s, and Carrs, which were included in the original divestiture plan, and adding the Haggen banner.
In a press release, Kroger said that if the deal is approved, stores under the aforementioned banners that Kroger and Albertsons retain will rebrand as either Kroger or Albertsons.
Kroger said that under the proposed deal, C&S will license the Safeway banner in Arizona and Colorado. Likewise, it will license the Albertsons banner in California and Wyoming.
Kroger will also re-banner the Albertsons and Safeway banners it retains in those states, and it will maintain the banners for those in the remaining states.
The mega-acquisition plan was met with opposition in late February when the Federal Trade Commission and attorneys general from eight states and the District of Columbia sued the company to block the deal over antitrust concerns. Attorneys general in Colorado and Washington state have filed separate lawsuits opposing the deal.
On Monday, Kroger Chairman and CEO Rodney McMullen said the new divestiture package addresses regulators' concerns and “will further ensure that C&S can successfully operate the divested stores as they are operated today.”
Whether C&S can take over the stores is among the biggest concerns raised by the FTC and attorneys general. In its complaint filed in February, the commission argued that C&S currently only operates 23 supermarkets and one retail pharmacy and would face substantial obstacles taking on more than 400 new stores.
“The proposal completely ignores many affected regional and local markets where Kroger and Albertsons compete today,” the FTC said. “In areas where there are divestitures, the proposal fails to include all of the assets, resources, and capabilities that C&S would need to replicate the competitive intensity that exists today between Kroger and Albertsons. Even if C&S were to survive as an operator, Kroger and Albertsons’s proposed divestitures still do not solve the multitude of competitive issues created by the proposed acquisition ...”
McMullen said on Monday that the new divestiture plan “continues to ensure no stores will close as a result of the merger and that all frontline associates will remain employed, all existing collective bargaining agreements will continue, and associates will continue to receive industry-leading health care and pension benefits alongside bargained-for wages.”
“Our proposed merger with Albertsons will bring lower prices and more choices to more customers and secure the long-term future of unionized grocery jobs," McMullen said in the press release.
The updated divestiture plan by state includes:
- Washington: 124 Albertsons Cos. and Kroger stores
- California: 63 Albertsons Cos. stores
- Colorado: 91 Albertsons Cos. stores
- Oregon: 62 Albertsons Cos. and Kroger stores
- Texas/Louisiana: 30 Albertsons Cos. stores\
- Arizona: 101 Albertsons Cos. stores
- Nevada: 16 Albertsons Cos. stores
- Illinois: 35 Albertsons Cos. and Kroger stores
- Alaska: 18 Albertsons Cos. stores
- Idaho: 10 Albertsons Cos. stores
- New Mexico: 9 Albertsons Cos. stores
- Montana/Utah/Wyoming: 11 Albertsons Cos. stores
- D.C./Maryland/Virginia/Delaware: 9 Harris Teeter stores
Kroger said the updated plan increases distribution capacity for the chain “through a combination of different and larger facilities as well as expanded transition services agreements to support C&S and the addition of one dairy facility.”
It also expands C&S’s corporate and office infrastructure. Fuel centers and pharmacies at the stores will also remain, the grocer said.
The plan also still includes the divestiture of several private label brands to C&S, including Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals, and Waterfront Bistro. C&S will also have access to the Signature and O Organics brands.
C&S will pay $2.9 billion for the stores and brands, Kroger said in the press release.
