Audio Sources - Full Text Articles

Albertsons, Kroger CEOs defend $25 bln merger to skeptical U.S. senators


Traders work as screens display the trading information for Kroger Co and Albertsons Cos Inc. on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 14, 2022. REUTERS/Brendan McDermid/File Photo

Top executives at Kroger Co (KR.N) and Albertsons Companies Inc (ACI.N) on Tuesday defended their planned $25 billion merger before skeptical lawmakers who fear the deal would push up food prices at a time of high inflation.

Kroger Chief Executive Rodney McMullen sought to justify the planned purchase of a big rival, telling the Senate Judiciary Committee’s antitrust panel that the combined company would be only the fourth-largest U.S. grocery seller, with Walmart Inc (WMT.N) well ahead.

“A combined Kroger and Albertsons will remain at number four as we will continue to compete with these companies to sell groceries. Those same three competitors have nearly three times the share of grocery sales of Kroger and Albertsons combined,” he said, according to written remarks.

Added Albertsons’ CEO, Vivek Sankaran, according to written remarks: “I’d like to add that this transaction is good for

Albertsons’ loyal customers, employees, and communities.”

In their opening remarks, Senators Amy Klobuchar, a Democrat and subcommittee chair, and Mike Lee, the top Republican on the panel, both pointed to Albertsons’ 2015 purchase of Safeway as a cautionary tale for the proposed merger.

In that case, the companies were forced to sell 168 stores to ensure that competition would remain fierce and prices would not rise. The divestiture failed, and Albertsons in fact bought back dozens of stores.

Kroger’s deal to buy Albertsons has also been criticized by unions and progressive groups, which have argued that the merger would exacerbate income inequality through job losses and eroding wages and have urged the Federal Trade Commission to block the deal.

The merger is being discussed at a time when the Biden administration is determined to bring down inflation. U.S. consumer prices rose less than expected in October, pushing the annual increase below 8% for the first time in eight months. Food prices increased 0.6%.

The companies, knowing the deal would be controversial and that antitrust enforcement has become tougher, offered an aggressive plan aimed at resolving concerns when they announced the deal, which would bring nearly 5,000 stores under one corporate umbrella, ranging from Safeway to Ralphs and Fred Meyer.

The companies have said they expect to sell between 100 and 375 stores to allay government concerns. Ideally, they would like to find buyers for the facilities but could also put them into a new company that would be owned by Albertsons’ shareholders. UBS has said it believes the plan will satisfy antitrust enforcers.

This plan could force the FTC, which is probing the deal to make sure it is legal under antitrust law, to not only prove in court that the transaction is illegal but that the proposed remedy is inadequate.

The companies have also been criticized for a plan to give Albertsons’ shareholders a $4 billion dividend payment. A Washington state court put that plan on hold with the next hearing set for Dec. 9. Separately, the attorneys general of Washington, D.C.; California and Illinois have also sued to stop that payment, arguing it would weaken the company’s ability to compete.

WP Radio
WP Radio