The sale, which includes other assets and is valued at $1.9 billion, is intended to help create a clear path for the merger with antitrust regulators reviewing the deal. The grocery chains say it’s an effort to compete with Walmart, Amazon, and other major companies.
Kroger and Albertsons agreed to merge last October after the former bid $20 billion for the latter. As part of the deal, Kroger would also assume $4.7 billion of Albertsons’ debt. However, the move will require federal approval, meaning the closures could take months. Officials say a decision may not be made until 2024.
If accepted, Kroger would sell more than 400 of its current stores and Albertsons locations to C&S Wholesale Grocers, a company that supplies independent grocers like Grand Union and Piggly Wiggly, military bases, and corporate-owned stores.
Doing so will help them manage prices, according to Russell Redman, the executive editor for Winsight Grocery Business Magazine and a grocery business analyst covering the merger.
“They’ll be able to do more investment in their stores and create better shopping experiences with cost savings from larger scale and better able to compete with large companies like Walmart and Amazon,” Redman said.
It is not yet clear which locations would be affected, though it’s likely that some grocery stores may keep the same name. The fuel centers and pharmacies associated with the chosen stores are also expected to continue to operate.
Kroger released a list of how many stores per state would be part of the divesture:
- Alaska: 14 Albertsons Cos. stores
- Arizona: 24 Albertsons Cos. stores
- California: 66 Albertsons Cos. and Kroger stores
- Colorado: 52 Albertsons Cos. stores
- District of Columbia/Maryland/Virginia: 10 Harris Teeter stores
- Idaho: 13 Albertsons Cos. stores
- Illinois: 14 Kroger stores
- Montana/Utah/Wyoming: 12 Albertsons Cos. stores
- Nevada: 15 Albertsons Cos. stores
- New Mexico: 12 Albertsons Cos. stores
- Oregon: 49 Albertsons Cos. and Kroger stores
- Texas/Louisiana: 28 Albertsons Cos. stores
- Washington: 104 Albertsons Cos. and Kroger stores
As for union worker agreements, Rodney McMullen, Kroger’s chairman and CEO, says C&S will honor all collective bargaining agreements.
Before the deal with C&S closes, Kroger may, in connection with securing Federal Trade Commission and other governmental clearance, require C&S to buy up to an additional 237 stores in certain regions. If more stores are added to the agreement, C&S will pay Kroger an additional as-yet-to-be-determined financial amount.
C&S has prior experience with divestitures related to mergers and has successfully transitioned union employees and their associated collective bargaining agreements in the past.
The Associated Press contributed to this report.