Acme, Safeway parent plans $24B merger with Kroger

Alberstons Companies, the parent company of Safeway and Acme Markets, has agreed to a merger with the nation’s largest grocery chain, Kroger. | DBT PHOTO BY JACOB OWENS

WILMINGTON – Albertsons Companies, the parent company of popular grocery store chains Acme Markets and Safeway, announced a plan to merge with Kroger, the nation’s largest supermarket company, in a deal worth about $24.6 billion.

The merger, which would combine the country’s two largest grocery store companies, would reverberate through the industry, but isn’t a sure thing, as it is likely to be heavily scrutinized by federal antitrust regulators.

The combination of Kroger, with about 420,000 employees in more than 2,700 stores, and Albertsons, with 290,000 employees and almost 2,300 stores, would reach 85 million households nationwide, the companies said in their Friday announcement.

In Delaware, Albertsons operates 15 Acmes and three Safeway, primarily in the greater Wilmington area, but also stretching down to Rehoboth Beach. Kroger has two stores in Sussex County after acquiring Harris Teeter Supermarkets.

The merger agreement, approved by both boards of directors and a majority of Albertsons stockholders, would see Ohio-based Kroger acquire all shares of Idaho-based Alberstons at a value of $34.10 per share, totaling a value of about $24.6 billion. The purchase price represents a premium of about 32.8% to Albertsons’ Oct. 12 closing price.

Investors were skeptical that the deal may succeed, however, as Albertson’s share price fell to $26.30 at close of trading Friday, or more than 22% below the merger price.

The merger of the two largest grocery competitors comes as the industry has been upended by the dominance of Walmart, which had more revenue from its groceries last year than both Kroger and Albertsons combined, the introduction of European low-budget markets like Aldi and Lidl, and the rising threat of Amazon’s grocery delivery potential.

The two companies do have some overlap in their locations, particularly on the West Coast, and said they would consider spinning off 100 to 375 stores into a new, standalone company to get the deal done.

Linda Khan, the chair of the Federal Trade Commission that would review the deal under antitrust statutes, has been openly wary of corporate consolidation, which could spell an uphill battle for the companies to win approval.

Perhaps in preparation for that review, Kroger said it plans to reinvest about $500 million of cost savings from the deal’s synergies to reduce prices for customers. An incremental $1.3 billion will also be invested into Albertsons stores to enhance the customer experience.

Unlike Walmart and Amazon, much of the companies’ workforces are also unionized, which could benefit them in winning federal approval as they would be more limited in potential layoffs following the deal. Kroger noted that it has invested an incremental $1.2 billion in associate compensation and benefits since 2018, and the combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after closing.

“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders,” said Rodney McMullen, Kroger chairman and CEO, who will continue in those roles of the combined company. “Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors.”

The deal, should it be approved by regulators, is scheduled to be complete in early 2024, the companies said.