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Kroger to Acquire Albertsons for $24.6bn, Creating a Grocery Giant in the US

Kroger has agreed to buy its rival Albertsons for $, a deal that could change the US retail industry and impact millions of customers. The Cincinnati, Ohio-based company will buy Albertsons for $34.10 per share, an almost 33% premium to the grocery chain’s average share price as of October 12. The price includes $4.7bn in debt.

The deal, which is expected to close in 2024, would combine two of the largest supermarket chains in the US. Although the combination would give the companies greater scale to compete with the likes of Walmart and Amazon, the deal is expected to face severe scrutiny from regulators at a time when food inflation reaches its highest level in the decade. Jointly the pair have more than 710,000 employees across 4,996 stores that operate in 4 out of 50 US states. The companies say they reach 85 million households. If the deal is completed, the company would become the third-largest retail chain in America by sales. Its combined market share would be 13.5%, only behind Walmart’s 15.5.% share in the $1.4 trillion grocery industry.

In response, the two companies said they are prepared to address potential antitrust risks. Kroger said the deal would benefit consumers as it will use $500mn to invest in lower prices. Albertson is known for having a higher price level compared to Kroger and analysts say Kroger may try to lower the chain’s prices. Kroger also said to spend $1bn to boost wages and benefits for its employees.

Consumer watchdogs, unions and Democrats have already come out strongly against the deal. They said such a large chain would result in higher prices and lower competition which would harm millions of consumers. Lina Khan, the pro-competition chair of the Federal Trade Commission (FTC) has said repeatedly that concentration in the supermarket industry has hurt consumers and suppliers. The regulator has blocked large retail mergers in the past, including the proposed deal between Staples and Office Depot. The FTC is currently looking into anti-competitive practices in the grocery industry and requested Korger and others for the cause of empty shelves and surging prices in the US last year.

Written by: Quynh Chi (Camila) Le

Source: Financial Times

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