The Kroger Co. and Albertsons Cos. Inc. say they have amended their definitive agreement with C&S Wholesale Grocers LLC for the sale of assets in connection with their proposed merger. The amended package modifies and builds on the initial divestiture package announced on Sept. 8, 2023.
Related: Kroger, Albertsons to divest with C&S Wholesale Grocers to advance merger
The amended divestiture package responds to concerns raised by federal and state antitrust regulators regarding the original agreement, according to a news release. The enhanced divestiture package includes a modified and expanded store set and additional nonstore assets to further enable C&S to operate competitively following the completion of the proposed merger.
The amended divestiture package will bolster their position in regulatory challenges to the proposed merger, including pending court proceedings, according to Kroger.
"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 in the release.
"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," McMullen added. "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."
Kroger says the proposed merger will create "meaningful and measurable benefits" for U.S. consumers, Kroger and Albertsons associates, and communities that both companies serve by expanding access to fresh, affordable food and "establishing a more compelling alternative to large, non-union retailers."
Related: FTC files lawsuit against Kroger-Albertson merger
"We are confident this expanded divestiture package will provide the stores, supporting assets and expert operators needed to ensure these stores continue to successfully serve their communities for many generations to come," Eric Winn, CEO of C&S Wholesale Grocers, said in the release. "C&S is a leader in the grocery industry, and we are excited for this expansion of our current retail business, which is a key part of our long-term growth strategy. We look forward to welcoming storied banners, quality private label brands, and a team of experienced retail associates into the C&S family. This amended agreement enables C&S's heritage of selection, value and customer service to continue our legacy of braggingly happy customers."
Transaction details
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 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 number of stores contained in the divestiture plan by geography is as follows:
- Washington — 124 Albertsons Cos. and Kroger stores.
- California — 63 Albertsons Cos. stores.
- Colorado — 91 Albertsons Cos. stores.
- Oregon — 62 Albertsons Cos. and Kroger stores.
- Texas/Louisiana — 30 Albertsons Cos. stores.
- Arizona — 101 Albertsons Cos. stores.
- Nevada — 16 Albertsons Cos. stores.
- Illinois — 35 Albertsons Cos. and Kroger stores.
- Alaska — 18 Albertsons Cos. stores.
- Idaho — 10 Albertsons Cos. stores.
- New Mexico — Nine Albertsons Cos. stores.
- Montana/Utah/Wyoming — 11 Albertsons Cos. stores.
- Washington, D.C./Maryland/Virginia/Deleware —Nine Harris Teeter stores.
The above stores will be sold by Kroger to C&S following the closing of the merger with Albertsons.
In connection with the additional stores being conveyed to C&S, 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 divestiture 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.
The company said 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 health care and pension benefits, bargained-for wages, and ensuring frontline associates remain employed.
- Commit to invest in associates and stores for the long term.
Subject to fulfillment of customary closing conditions, including Federal Trade Commission and other governmental clearance, and the completion of the Kroger-Albertsons merger, C&S would pay Kroger an all-cash consideration of approximately $2.9 billion, including customary adjustments.
The proposed merger with Albertsons will produce meaningful and measurable benefits for customers, associates and communities across the country. The combined company committed that no stores, distribution centers or manufacturing facilities will close as a result of the merger, Kroger said.
Kroger said it has committed to investing $500 million to begin lowering prices Day 1 post-close, and an additional $1.3 billion to improve Albertsons stores.
Kroger and Albertsons remain committed to defending the merger in court and unlocking the many benefits it offers, according to the release.