Retail

Albertsons, Kroger CEOs Defend $25bn Merger To US Senate Committee

By Steve Wynne-Jones
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Lawmakers from across the political spectrum have questioned executives at grocers Kroger Co and Albertsons Companies Inc about their planned $25 billion (€24.14 billion) merger amid concerns the tie-up could boost already-high food prices.

Senator Amy Klobuchar, a Democrat and chair of the Senate Judiciary Committee's antitrust subcommittee, said she worried the deal would mean a loss of competition in groceries, and potentially higher costs, at a time when inflation is already high.

"That's why you've heard concern across the country about this transaction," she said.

The deal will be reviewed by the Federal Trade Commission to ensure it is legal under antitrust law.

Read More: Kroger, Albertsons Spin-Off Is Extra Ammunition In Regulatory Battle: Analysis

'Smaller Than Walmart'

Kroger Chief Executive Rodney McMullen sought to allay lawmakers' worries about the planned purchase of a big rival, noting that the merged firms would still be much smaller than Walmart, the top grocer in the US. "The combined company will remain at number four," he said.

Stores under the Albertsons umbrella include Balducci's, Haggen, Kings, Safeway, Star Market, Tom Thumb, United Supermarkets and Vons, among others. Kroger owns Baker's, Dillons, Fred Meyer, King Soopers, Mariano's, Pick'n Save and Ralphs.

Safeway Purchase

Klobuchar and Senator Mike Lee, the top Republican on the panel, both pointed to Albertsons' 2015 purchase of Safeway as a cautionary tale.

In that case, the companies were forced to sell 168 stores to ensure that competition would remain fierce and prices would not rise. The divestiture failed, and Albertsons bought back dozens of stores.

The companies, knowing this new tie-up would be controversial and that antitrust enforcement has become tougher, offered an aggressive plan aimed at resolving concerns when they announced the deal, which would bring nearly 5,000 stores under one corporate umbrella.

The grocers said they expected to sell between 100 and 375 stores ideally to outside buyers but could also put them into a new company that would be owned by Albertsons' shareholders. UBS has said it believes the plan will satisfy antitrust enforcers.

This plan could force the FTC to not only prove in court that the transaction is illegal but that the proposed remedy is inadequate.

Union Criticism

Kroger's deal to buy Albertsons has also been criticised by unions and progressive groups, which have argued that the merger would exacerbate income inequality through job losses and eroding wages and have urged the government to block the deal.

The merger is being discussed at a time when the Biden administration is determined to bring down inflation. U.S. consumer prices rose less than expected in October, pushing the annual increase below 8% for the first time in eight months. Food prices increased 0.6%.

News by Reuters, edited by by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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