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Kroger, Albertsons Agree to Divest More Stores

CINCINNATI — Kroger Co. and Albertsons Cos. said Monday that they are planning to divest more stores in an effort to satisfy regulators and move their merger plans forward.

The companies now intend to sell 579 stores under a revised deal with C&S Wholesale Grocers. That is 166 more than were called for in the original agreement. Kroger also said it would sell its Haggen banner to C&S as part of the deal.

“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,” Kroger chairman and CEO Rodney McMullen said. “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 amended divestiture package responds to concerns raised by federal and state antitrust regulators regarding the original agreement. The enhanced divestiture package includes a modified and expanded store set and additional non-store assets to further enable C&S to operate competitively following the completion of the proposed merger. The companies believe the amended divestiture package will bolster their position in regulatory challenges to the proposed merger, including pending court proceedings.

The updated divestiture package increases the total store count by 166 to include 579 stores that will be sold to, and continue operating as they do today by the new owner, C&S.

It 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 are retained by Kroger 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. In these states, Kroger will re-banner the retained Albertsons and Safeway bannered stores following the closing of the merger. Kroger will maintain the Albertsons and Safeway banners in the remaining states.

The plan calls for the sale to C&S of 63 Albertsons Cos. stores in California, 91 Albertsons Cos. stores in Colorado, 124 Albertsons Cos. and Kroger stores in Washington, 62 Albertsons Cos. and Kroger in Oregon, 30 Albertsons Cos. stores in Texas and Lousiana, 101 Albertsons stores in Arizona, 16 Albertsons Cos. stores in Nevada, 35 Albertsons Cos. and Kroger stores in Illinois, 18 Albertsons Cos. stores in Arkansas, 10 Albertsons Cos. stores in Indiana, 9 Albertsons Cos. stores in New Mexico, 11 Albertsons Cos. stores in Montana, Utah and Wyoming, and 9 Harris Teeter stores in the Maryland, Virginia and Delaware and in the Washington D.C. metropolitan area.

Besides the additional stores, the updated divestiture package includes increased distribution capacity through a combination of different and larger facilities as well as expanded transition services agreements to support C&S and the addition of one dairy facility.

The amended 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.

According to the companies, the updated plan will:

  • Extend a competitor to new geographies through the sale of stores to a well-capitalized buyer that is led by seasoned operators with a strong balance sheet and a sound business plan;

  • Ensure that no stores will close as a result of the merger;

  • Maintain all current collective bargaining agreements, which include industry-leading healthcare and pension benefits, bargained-for wages, and ensuring frontline associates remain employed; and

  • Commit to invest in associates and stores for the long term.

The deal, subject to fulfillment of customary closing conditions, including Federal Trade Commission and/or other governmental clearance, and the completion of the Kroger-Albertsons merger, calls for C&S to pay Kroger an all-cash consideration of approximately $2.9 billion, including customary adjustments.

Kroger says  its proposed merger with Albertsons Cos. will produce meaningful and measurable benefits for customers, associates and communities across the country, adding that it has committed that no stores, distribution centers or manufacturing facilities will close as a result of the merger. Kroger also says that deal will also result in lower prices for consumers and better and more secure jobs for workers.

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