In what would be a step toward monopoly, America’s largest grocery chain wants to buy its second largest.
Kroger Co., which owns Fred Meyer, QFC, and two dozen other chains, announced Oct. 14 an agreement to buy Albertson’s Companies, which owns Albertson’s, Safeway, Shaws, Haggen and 17 other chains. Both companies’ stock is publicly traded on the New York Stock Exchange, and the sale agreement would have Kroger buy all outstanding shares of Albertsons’ for $20 billion, while also assuming $4.7 billion in Albertson’s debt, with $17.4 billion in bridge financing from its financial advisors Citi and Wells Fargo. Albertsons would also pay a special cash dividend of up to $4 billion to shareholders. The deal would close in early 2024.
The mega-merger would be the culmination of decades of consolidation in the grocery industry. Kroger, based in Cincinnati, Ohio, merged with Fred Meyer in 1999. Albertsons, based in Boise, Idaho, was bought in 2006 by a consortium of investors led by the private equity firm Cerberus Capital Management, merged with Safeway in 2015, and became publicly traded in 2020. [Cerberus’ name comes from Greek mythology; it’s the three-headed dog that guards the gates of hell.]
If federal antitrust regulators allow the sale, the combined company would be a colossus, operating in 48 states, with 710,000 employees, 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies and 2,015 fuel centers.
To prevent total monopoly in some local markets and thereby get around antitrust rules, Kroger proposes to spin off between 100 and 375 stores into a newly formed entity it calls “SpinCo.”
But SpinCo might be a better description for the parent company, considering the lengths it’s going to spin the merger as a good thing for workers and customers.
“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 companies said in a joint announcement. The primary nonunion competitor is Walmart; though first and foremost a general retailer, it actually sells more groceries than any other company.
Kroger says the merger would help achieve its purpose as a company, which is to “Feed the Human Spirit.” [It registered a trademark to ensure it has a monopoly on the commercial use of that phrase.]
In the announcement, Kroger made nonspecific and non-binding pledges to invest half a billion dollars to lower prices for customers and $1 billion to raise employee wages and benefits.
But grocery unions aren’t buying it. The day before the official announcement, five Western United States locals of United Food and Commercial Workers (Locals 7, 324, 367, 770, 3000) issued a joint statement opposing the merger, together with Teamsters Local 38.
“The proposed merger of these two grocery giants is devastating for workers and consumers alike and must be stopped,” the unions said. “This proposed merger of two of the largest grocery companies in the nation will no doubt create a monopoly in the grocery industry for many communities…. We are asking the appropriate administrative and elected officials to step in and stop this merger and protect workers and consumers.”
UFCW International President Marc Perrone issued a more equivocal statement a day later, saying the merger “has serious implications for hundreds of thousands of our UFCW members and America’s families,” adding that UFCW and its local unions are discussing it, and will oppose “any merger that threatens the jobs of America’s essential workers, union and non-union, and undermines our communities.”
