Timeline: One year in, Kroger-Albertsons merger remains uncertain

After a year, the proposed mega-merger of The Kroger Co. and Albertsons Cos. remains just as much of a question mark as when it was first announced.

This Saturday marks the one-year anniversary of Kroger and Albertsons' unveiling of their $24.6 billion agreement on Oct. 14, 2022. The deal would combine nation’s first- and second-largest supermarket retailers into a company with annual revenue of about $210 billion and 4,996 stores (excluding divestitures), 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies, 2,015 fuel centers and 710,000 workers in 48 states and D.C.

Expected by the retailers to close in early 2024, the transaction would mark the largest U.S. supermarket merger ever.

The pendulum has swung back and forth over the massive merger’s likelihood of moving forward. When the Kroger-Albertsons merger deal first came to light, industry observers and stakeholders by and large thought regulators would never approval such a huge deal. Immediate strong opposition to the transaction—as well as to a $4 billion special dividend by Albertsons announced with the merger—also darkened the deal’s prospects.

But then, as Kroger and Albertsons made their case, the sentiment among industry analysts appeared to shift to the belief that the supermarket giants had found a path to satisfy antitrust concerns and get the merger green-lighted. More recently, however, brewing investigations and legal challenges by states and comments by Federal Trade Commission Chair Lina Khan seemed to signal that Kroger might have to go the litigation route to push the merger through.

Related:Kroger-Albertsons merger stirs uneasiness in California

Much of the FTC’s antitrust assessment of the Kroger-Albertsons transaction depends on how broadly or narrowly regulators define the grocery retail marketplace. Will the agency only look at the deal’s impact on conventional supermarket competition, or will it consider the broader grocery retail arena of mass merchants, warehouse clubs, limited-assortment discount grocers, dollar stores, drug store chains, convenience stores and online retailers (i.e. Amazon)?

The current focus is on a potential antitrust remedy: Kroger and Albertsons' $1.9 billion deal to sell 413 stores, eight distribution centers and two regional headquarters in 17 states and the District of Columbia to C&S Wholesale Grocers. If required by the Federal Trade Commission, C&S would buy 237 additional stores under the agreement. Kroger and Albertsons had projected that they would need to divest 100 to 375 stores for their transaction to gain approval from federal and state regulators. The merger deal also had set a 650-store cap on divestitures, at which point they could re-evaluate the agreement.

Related:Kroger’s Rodney McMullen sheds light on Albertsons merger at Groceryshop

Yet opposition to the C&S agreement has escalated of late, with critics saying the deal doesn’t go far enough to address antitrust, consumer, labor and supply chain concerns. That suggests Kroger and Albertsons may have to augment the C&S pact or seek divestitures to other big grocery retail players—or, ultimately, mount a legal challenge if their merger is nixed by the FTC.

Stay tuned.