Kroger and Albertsons updated their divestiture package, increasing the total store count by 166 to include 579 stores to sell and continue operating as they do by the new owner, C&S.
The two groceries updated their agreement with C&S Wholesale Grocers, LLC, announced on October 14, 2022; the new package is a modification and expansion of divestiture, announced on September 8, 2023.
The updated divestiture package maintains the sale to C&S of the QFC, Mariano’s and Carrs banner names. Under the amended agreement, Kroger will also sell the Haggen banner to C&S. Stores currently under these banners that Kroger retains will be re-bannered into one of the retained Kroger or Albertsons Cos. banners following the close of the transaction with C&S.
Under the amended agreement, C&S will license the Albertsons banner in California and Wyoming and the Safeway banner in Arizona and Colorado. After the merger’s closing, Kroger will re-banner the retained Albertsons and Safeway-bannered stores in these states. Kroger will maintain the Albertsons and Safeway banners in the remaining states.
The updated plan will be subject to fulfillment of customary closing conditions, including Federal Trade Commission and/or other governmental clearance, and the completion of the Kroger-Albertsons merger; C&S will pay Kroger an all-cash consideration of approximately $2.9 billion, including customary adjustments.
Transaction Details
Number of stores included in the divestiture plan, by geography:
- Washington: 124 Albertsons Cos. and Kroger stores
- California: 63 Albertsons Cos. stores
- Colorado: 91 Albertsons Cos. stores
- Oregon: 62 Albertsons Cos. and Kroger stores
- Texas/Lousiana: 30 Albertsons Cos. stores
- Arizona: 101 Albertsons Cos. stores
- Nevada: 16 Albertsons Cos. stores
- Illinois: 35 Albertsons Cos. and Kroger stores
- Alaska: 18 Albertsons Cos. stores
- Idaho: 10 Albertsons Cos. stores
- New Mexico: 9 Albertsons Cos. stores
- Montana/Utah/Wyoming: 11 Albertsons Cos. stores
- D.C./Maryland/Virginia/Delaware: 9 Harris Teeter stores
Regardless of the banner, the stores will be sold to C&S after the Kroger and Albertsons merger.
In connection with the additional stores being conveyed to C&S, the updated divestiture package includes increased distribution capacity through a combination of different and more extensive facilities and expanded transition services agreements to support C&S and adding one dairy facility.
The amended divestiture package also expands the corporate and office infrastructure provided to C&S, given the increased store set, to ensure C&S can continue to operate the divested stores competitively and cohesively. All fuel centers and pharmacies associated with the divested stores will remain with the stores and continue to operate.
The amended agreement maintains the divestiture of private label brands Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro to C&S. The revised agreement also provides C&S with access to the Signature and O Organics private label brands.
Related Article: Kroger will Fight in Court the FTC’s Lawsuit Over its Merger with Albertsons
A close look at the Updated Divestiture Package
The amended divestiture package responds to concerns raised by federal and state antitrust regulators regarding the original agreement. Both companies believe the amended divestiture package will bolster their position in regulatory challenges to the proposed merger, including pending court proceedings.
“We have reached an agreement with C&S for an updated divestiture package that maintains Kroger’s commitments to customers, associates and communities, addresses concerns raised by regulators, and will further ensure that C&S can successfully operate the divested stores as they are operated today,” said Rodney McMullen, Kroger’s Chairman and CEO. “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. Our proposed merger with Albertsons will bring lower prices and more choices to more customers and secure the long-term future of unionized grocery jobs.”
The two grocers believe the proposed merger will create meaningful and measurable benefits.
“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. We look forward to welcoming storied banners, quality private label brands, and a team of experienced retail associates into the C&S family. This amended agreement enables C&S’s heritage of selection, value and customer service to continue our legacy of braggingly happy customers.”
What the United Food and Commercial Workers International Union (UFCW) said
“This bigger proposed divestiture simply increases the challenge C&S, a New Hampshire-based wholesaler, would have trying to operate a hodgepodge chain of retail stores. They have no experience operating retail stores in these states, would still lack the IT, customer loyalty and manufacturing capabilities needed, and would most likely end up monetizing the real estate under many of these stores,” said a coalition of UFCW locals (Locals 5, 7, 324, 400, 770, 1564 and 3000). These local UFCWs have been central in the coalition opposing the proposed merger from the get-go and represent over 100,000 Kroger and Albertsons workers across the nation from Washington DC and surrounding states, and California, Colorado, New Mexico, Washington state and Wyoming.