McMullen: Kroger-Albertsons merger on track to close early next year

Confirming recent published reports, The Kroger Co. Chairman and CEO Rodney McMullen said it has essentially met the Federal Trade Commission’s additional information request for the planned $24.6 billion acquisition of Albertsons Cos.

Cincinnati-based Kroger had received a second request for information from the FTC on the proposed merger with Albertsons in early December. The request signaled that the FTC held significant antitrust concerns and sought a much deeper investigation, which industry observers at the time said could extend the review by months and the time to finalize the transaction by a year.

After Kroger and Albertsons announced an early 2024 target for closing the deal, unveiled over a year ago, Wall Street analysts and other observers said regulatory clearance likely would take longer for such a large transaction—the biggest U.S. supermarket merger ever—and could last up to two years.

Yet in reporting third-quarter results on Thursday, McMullen said the early 2024 timetable for wrapping up the merger remains intact.

“As of Nov. 15, 2023, Kroger certified substantial compliance with the second request issued by the FTC. We continue to work cooperate live with the FTC and its review of the transaction. This step keeps us on track to close our proposed merger with Albertsons in early 2024,” McMullen told analysts in a conference call. “We are confident that we have fulfilled all the commitments we set out in the original merger agreement, including the comprehensive divestiture plan announced with C&S Wholesale Grocers.” (Call transcript provided by AlphaSense.)

Related:Decision time for Kroger-Albertsons merger gets closer

Under a $1.9 billion agreement announced in early September, Kroger-Albertsons plans to sell 413 stores, eight distribution centers and two regional offices in 17 states and the District of Columbia plus five Albertsons private brands to Keene, New Hampshire-based C&S. The pact, too, might require C&S—which also committed to honor union contracts—to buy another 237 stores based on Kroger and Albertsons securing FTC and other regulatory approval for their merger.

Kroger has frequently reiterated its case for the Albertsons acquisition. Post-merger, the company plans significant investments in pricing, stores, local suppliers and employees, and it has said no layoffs would result from the merger. Kroger also has said union contracts will be honored. And McMullen has noted the deal with C&S resulted from a careful search for a large, experienced and unionized grocery industry player as a divestiture partner.

Related:Kroger-Albertsons merger naysayers deliver their message to FTC Chair Lina Khan

“C&S is a well-qualified buyer who meets all the criteria necessary to complete our transaction and will ensure no stores will close as a result of the merger. Frontline associates will remain employed, and existing collective bargaining agreements will continue,” McMullen said in the analyst call. “We have made a compelling case to both Kroger and Albertsons stakeholders. Our proposed merger with Albertsons creates meaningful and measurable benefits for our customers by lowering prices beginning on day one, extends our commitments to associates by increasing wages and benefits, and deepens trust with our communities by keeping stores open to assure America has access to fresh and affordable food.”

Advance planning also continues to move forward, McMullen told analysts, noting that Kroger and Albertsons are “progressing well” in integration preparations.

“Our integration teams have made significant progress toward our first goal, which is to ensure continuity for associates and customers at closing,” he said. “It is exciting to see the complementary strength of both organizations and how we’ll be able to learn from each other to provide customers with an even stronger food retail experience and compete even more effectively against larger, non-union operators in the future.”

Related:Kroger-Albertsons merger divestiture to C&S called 'adequate remedy'

The Kroger-Albertsons merger—joining the nation’s largest conventional supermarket retailers—would form a company with annual revenue of about $210 billion and 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies, 2,015 fuel centers and 710,000 workers in 48 states and the District of Columbia.

“Kroger believes its proposed merger with Albertsons will close in early 2024,” CFRA Research analyst Arun Sundaram wrote in a research note on Thursday. “We keep a ‘hold’ rating.”