After the Attempted Albertson’s Merger
Kroger is looking to acquire Giant Eagle at ~1.7 billion. So far the FTC has not made a peep. The franchise can be found in Ohio, western Pennsylvania, West Virginia, Maryland and Indiana.
“Kroger is again Looking to Acquire Other Supermarket Chains”
Is a Merger and Acquisition (M&A) Strategy good for Kroger? Probably as it then has stores in an area it is not in with any great strength. Rather than build, Kroger buys grocery store chains. The benefits of buying a regional grocer are not particularly compelling or captivating and demanding attention, If you remember, there was an earlier $24 billion strategy of Kroger merging with Albertsons. Apparently, Kroger changed its mind on the merger. Albertsons was then seeking billions of dollars in damages from Kroger to make Albertsons and its shareholders whole. Apparently, the battle is still going on between Albertsons and Kroger in the courts. It was a matter of timing and opposition with regard to the merger. First the FTC objected and then a Federak Judge blocked the union of both stores.
Kroger spent $1 billion defending itself in court with Albertsons. And then there is C&S on the side lines as a silent partner with Kroger. C&S was to pick up 600 Kroger and Albertsons stores out of the deal which did not happen. Another loss.
Kroger is looking Giant Eagle as a merger partner. I am not reading where the merger is being resisted. The $1.65 billion deal (which the companies expect to close sometime next year) nets Kroger nearly 200 stores and a handful of pharmacies at a cost akin to a well-crafted in-store promotion One article calls it just too good to pass up.
The geographic benefits of adding Giant Eagle are clear but don’t seem as compelling as in past deals. Kroger already has stores in four out of the five states where Giant Eagle operates. The major market additions are Pennsylvania, where Kroger doesn’t currently operate any stores in Western Pennsylvania, where Giant Eagle has built a robust presence ($6 billion) stemming from its Pittsburgh headquarters. Included is Northeast Ohio, a market where Kroger has not operated for decades. It does get Kroger in new territory at a reasonable cost. The acquisition may put Giant Eagle in a better competitive position.
Looking back at the history . . . the Kroger merger with its competitor Albertsons was blocked by the FTC. Grocery workers were central to the FTC’s case in a way traditional antitrust proceedings rarely include. Economic Policy Institute research found the merger could reduce outside employment options across approximately 50 cities, lowering grocery worker wages by $334 million annually or roughly $450 per worker per year. With over 746,000 workers across both chains, the FTC argued the combined entity would gain monopsony power, suppressing wages by reducing the number of competing employers available. The merger would increase sales and still leave them smaller than WalMart.
Kroger would become the largest competitor to Walmart once the merger was completed. Apparently, the courts did not see value to a merger benefiting Kroger and harming labor. The $25 billion merger was blocked by the FTC which argued the combined entity would gain monopsony power, suppressing wages by reducing the number of competing employers available.
So far, it appears the FTC will not block Kroger from acquiring Giant Eagle. The merger is expected to close in 2027. The companies are planning to divest a limited number of Giant Eagle stores to satisfy regulators.
Taken from TheStreet, “Kroger just shook up the supermarket landscape.” Original article written by by Opeyemi Babalola.