Kroger announced Friday that it plans to buy Albertsons, offering a deal worth nearly $25 billion that could change the U.S. retail industry and affect how millions of customers shop for groceries.
The deal, which is expected to close in 2024, would combine the country’s two largest supermarket chains and create an industry giant that could threaten antitrust laws.
The two companies have a total of 710,000 workers, most of whom are unionized in an industry with low union rates, about 5,000 stores and more than $200 billion in sales.
The companies say they reach 85 million homes.
The retail industry has consolidated in recent years, and the merger will give the companies a better chance to fight off competition from Amazon, Walmart and other retail giants.
Traditional supermarkets have come under pressure from these companies and others: discount chains like Dollar General and Aldi, warehouse clubs like Costco and online grocers.
The merger “accelerates our position as a more attractive alternative to larger, non-union competitors,” Kroger CEO Rodney McMullen said in a statement Friday.
If the deal goes through, it would be one of the largest mergers in U.S. retail history, surpassing Amazon’s $13.7 billion acquisition of Whole Foods in 2017.
The company will become America’s third largest retail chain by sales. Its combined market share of the $1.4 trillion grocery sector would be 13.5%, according to Morgan Stanley, making it the second-largest supermarket chain after Walmart’s 15.5% share.
The move also comes as companies grapple with higher costs and food inflation is at its highest level in decades. Prices in supermarkets continued to rise last month.
The food index, which is an indicator of supermarket prices, increased by 0.7% in September compared to the previous month, and by 13% compared to the previous year.
Kroger said the deal would benefit consumers and use half a billion dollars in cost savings from the merger to invest in lower prices. Albertsons is known to have higher prices than Kroger, and analysts say Kroger may be trying to undercut the chain’s prices.
Kroger will buy Albertsons for $34.10 per share, about 30% above the supermarket chain’s average stock price over the past month.
Shares of Kroger fell 5% in early trading Friday, while Albertsons fell 7%.
The two companies operate dozens of supermarket chains. Kroger operates Ralphs, Harris Teeter, Dillons, Fred Meyer and others, while Albertsons owns Safeway and Vons.
The companies said they would close about 400 stores to form a new competitor in an attempt to win antitrust clearance. Analysts expect some stores to close if the deal goes through, and also say it would be a significant obstacle to passing antitrust checks.
“A deal of this size, which has an immediate impact on consumers, will face significant regulatory scrutiny and take a long time,” said Telsey Advisory Group analyst Joseph Feldman.
Consumer watchdogs, labor unions and Democrats have already come out strongly against the deal. They say it would hurt consumers by raising prices and crowding out competition. It could also spur a new wave of industry consolidation among smaller companies trying to compete.
Senator Bernie Sanders called it an “absolute disaster” and urged the Biden administration to reject the deal. The American Economic Freedom Project, an antitrust organization, said the “merger would be disastrous for market competition, small businesses and especially consumers’ pockets.”
FTC Chairwoman Lina Khan is critical of corporate consolidation, and the regulator has blocked major retail mergers in the past, including Staples’ attempts to merge with Office Depot.
The FTC is currently investigating anticompetitive practices in the food industry and last year requested information from Kroger and others about the causes of empty shelves and price increases in the United States.
This content was originally created in English.