Kroger and Albertsons Companies, two of the nation’s largest grocers, have entered into a definitive agreement under which the two companies will merge.
Approved by the boards of directors of each company, Kroger will acquire all outstanding shares of Albertsons in a deal valued at approximately $24.6 billion, which includes the assumption of approximately $4.7 billion of Albertsons debt.
Together, the two companies currently employ more than 710,000 associates and operate 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies and 2,015 fuel centers.
Additionally, an incremental $1.3 billion will also be invested into Albertsons stores to enhance the customer experience. Kroger will also build on its recent investments in associate wages, training and benefits. Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close.
The transaction is expected to close in early 2024, subject to the receipt of required regulatory clearance and other customary closing conditions, including receipt of clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders,” said Rodney McMullen, Kroger chairman and chief executive officer, who will continue serving as chairman and CEO of the combined company. “Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. 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.”
McMullen said the combined entity will better position Kroger to advance its go-to-market strategy by providing a seamless shopping experience, expanding its Our Brands portfolio, and delivering personalized value and savings. The deal will also allow for enhancements to technology and innovation, promotion of healthier lifestyles and an extended health care and pharmacy network, he said.
“At Albertsons Cos. we are guided by an ambition to create customers for life,” said Vivek Sankaran, CEO of Albertsons Cos. “Together with Kroger, our combined iconic banners will be able to provide customers with even more value and greater access to fresh food and essential pharmacy services. Given the similarities in the culture and values at Kroger and Albertsons Cos., I am confident that the combination will also have a positive impact on our associates and the communities we are proud to serve. We look forward to working together with Kroger to capture the compelling opportunities ahead.”
Kroger officials said the deal should also advance its strategy of Leading with Fresh, Accelerating with Digital and enable the combined company to build on Kroger’s go-to-market strategy that includes Fresh, Our Brands, Personalization and Seamless.
In connection with obtaining regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. Albertsons is prepared to establish an Albertsons Cos. subsidiary (SpinCo), which would be spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company.
Kroger and Albertsons have agreed to work together to determine which stores would comprise SpinCo. The establishment of SpinCo, which is estimated to comprise between 100 and 375 stores, would create a new, agile competitor with quality stores, experienced management, operational flexibility, a strong balance sheet, and focused allocation of capital and resources to provide customers with continued value and quality service and associates with ongoing compelling career opportunities, company officials said