Kroger and Albertsons are selling roughly 400 stores to Piggly Wiggly’s parent company in an attempt to win antitrust approval for the mega merger between the grocery stores.
C&S Wholesale Grocers will pay $1.9 billion, with the deal expected to close in early 2024 subject to regulatory approval, the company said in a statement. C&S, a privately held company, operates 500 grocery stores under the Piggly Wiggly and Grand Union banners and is also a major grocery wholesaler.
“This comprehensive divestiture plan marks a key next step toward the completion of the merger by extending a well-capitalized competitor into new geographies,” Kroger and Albertsons said in the statement, adding that no stores are closing and “all existing collective bargaining agreements will continue.”
Under terms of the deal, C&S will also get three smaller grocery store brands including QFC, Mariano’s and Carrs as well as the “exclusive licensing rights” to the Albertsons name in Arizona, California, Colorado and Wyoming.
“Our retail locations are a critical resource not only for necessities but also as an integral part of the local area they serve,” C&S President Mark McGowan said in a statement. “We look forward to welcoming our new employees into the C&S family of companies and leveraging C&S’s strong heritage of selection, value and customer service to continue our mission of keeping our communities fed.”
Kroger announced it was buying Albertsons in a nearly $25 billion deal last October and previously announced it as looking to offload hundreds of locations as way to gain antitrust clearance. The transaction is expected to close next year depending on regulatory approval.
When merged, the two companies will have a combined 710,000 workers – most of them unionized in an industry with low union rates – nearly 5,000 stores and more than $200 billion in sales. The companies say they reach 85 million households.
The retail industry has consolidated in recent years, and merging would give the companies greater scale to fend off competition from Amazon, Walmart, and other retail giants. Traditional supermarkets are pressured by these companies and others – including discount chains such as Dollar General, Aldi, warehouse clubs like Costco, and online grocers.
A few weeks ago, German supermarket chain Aldi announced it was buying 400 Winn-Dixie locations in a move to increase its presence in new US regions. Aldi has a goal of operating 2,400 stores by the end of 2024.
On Friday, Kroger reported $33.85 billion in revenue for the second quarter, slightly under analyst estimates of $34.63 billion. It reported a net loss of $180 million, or 25 cents per share, compared to a $731 million net income, or $1 per share, gain in the same period a year ago. Company executives said part of the quarterly loss related to economic headwinds, organized retail theft and opioid settlement payments.
Kroger also announced Friday that it’s paying $1.2 billion to US states and $36 million to Native American tribes to “settle the majority of opioid claims” brought against the company. The company accounted for a $1.4 billion charge in the second quarter related to the settlement.
In a statement, Kroger said that the settlement would allow “full resolution of all claims,” but said that the settlement is “not an admission of wrongdoing or liability by Kroger and Kroger will continue to vigorously defend against any other claims and lawsuits relating to opioids that the final agreement does not resolve.”
Previous lawsuits allege the pharmacies’ contribution to the oversupply of prescription opioids in the state have caused “significant losses through their past and ongoing medical treatment costs.”
State and local governments have filed thousands of lawsuits against drug companies and wholesalers accused of fueling the crisis, resulting in a plethora of settlement deals. The largest to date is a $26 billion settlement involving several companies that began paying out last year and continues for 18 years.
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