Kroger/Albertsons: 166 Stores and Support Assets Added To Updated Divestiture Plan With C&S

Two months after the Federal Trade Commission (FTC) completed a review of Kroger and Albertsons’ proposed supermarket mega-merger and filed a lawsuit to block the deal, the grocery chains have added more store locations and assets to an updated version of their definitive divestiture agreement with C&S Wholesalers.

The new agreement is valued at approximately $2.9 billion, according to a press release, and includes an additional 166 Kroger and Albertsons stores, bringing the total planned store divestments in relation to the merger up to 579. Kroger and Albertsons have previously claimed they can divest up to 650 stores to C&S.

The majority of divested stores are coming from the West Coast with both retailers selling a combined 124 in Washington state. However, Albertsons will contribute the majority of the stores through the new plan, including 101 in Arizona, 91 in Colorado, 63 in California and 62 in Oregon. A number of Albertsons banners will also be sold in Texas, Louisiana, Nevada, Illinois, Arkansas, Idaho, New Mexico, Montana, Utah and Wyoming.

Kroger will divest stores in Oregon, Illinois, and nine Harris Teeter stores between Maryland, Virginia, Delaware and Washington, D.C. Per terms of the deal, all divested stores, regardless of the banner, will be sold by Kroger to C&S. Additionally, fuel centers and pharmacies at divested locations will remain part of those stores and continue to operate.

“We are confident this expanded divestiture package will provide the stores, supporting assets and expert operators needed to ensure these stores continue to successfully serve their communities for many generations to come,” said Eric Winn, CEO of C&S. “C&S is a leader in the grocery industry, and we are excited for this expansion of our current retail business, which is a key part of our long-term growth strategy.”

Alongside the stores, the retailers have also added store-support resources including increasing distribution capacity for C&S with a combination of access to larger facilities, expanded transition services agreements as well as the addition of one new dairy facility. Corporate and office infrastructure are also part of the package.

Lastly, the updated plan will give C&S access to two additional private brands: Signature and O Organics. The deal has maintained the original agreement that Kroger and Albertsons will divest their Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro brands to C&S.

According to the press release, the updated agreement helps extend competitor C&S into new geographies, “ensure that no stores will close as a result of the merger” and retain all current collective bargaining agreements. The deal will also allow the combined retailers to invest in employees and its stores long term, Kroger and Albertsons claim.

“Importantly, the updated 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,” said Rodney McMullen, Kroger’s chairman and CEO.

The updated plan is still subject to a review by the FTC and must be approved to move forward. As of February, that seemed unlikely under the leadership of the regulator’s current chairwoman, Lina Khan. At the time, the agency voted to block the deal 3-0; a temporary restraining order and preliminary injunction followed suit.

Additionally, the FTC rejected the divestiture plan, dubbing it “inadequate” and criticizing that it featured a “hodgepodge of unconnected stores, banners, brands, and other assets that Kroger’s antitrust lawyers have cobbled together.”

Kroger and Albertsons asserted in today’s press release that both retailers “remain committed to defending the merger in court and unlocking the many benefits it offers.”