Kroger Plans to Buy Albertsons for $25 Billion, Compete with Walmart

Last Friday, Kroger announced their plans to buy Albertsons in a nearly $25 billion deal. This marks the merging of two of the largest supermarkets in America and now presents major competition for Walmart. 

The deal, expected to close in 2024, would have a combined 710,000 employees, nearly 5,000 stores and rake in more than $200 billion in sales. 

The merging of the two companies gives them a larger advantage when it comes to competing against major retailers like Walmart and Amazon. According to CNN, “Traditional supermarkets have been pressured by these companies and others – discount chains such as Dollar General (DG) and Aldi, warehouse clubs like Costco (COST), and online grocers.”

CEO of Kroger, Rodney McMullen, said in a statement on Friday, The merger “accelerates our position as a more compelling alternative to larger and non-union competitors.”

Yahoo Finance reported, however, that the deal could “stifle competition and lead to higher prices for American shoppers already grappling with this year’s surge in inflation, according to some analysts.”

In order to appease customers, “the companies have charted plans to divest some stores and Albertsons is ready to spin off a standalone unit to its shareholders immediately before the Kroger deal closes. The new public company is estimated to comprise as many as 375 stores,” according to Yahoo Finance.

Additionally, they reported that “Kroger expects to reinvest about half a billion dollars of cost savings from deal synergies to reduce prices for customers. An incremental $1.3 billion will also be invested into Albertsons.”

Here’s some additional information to note regarding the merging of the grocery stores, provided by Yahoo Finance:

• • “Kroger will pay $34.10 for each Albertsons share, representing a premium of about 33% to the stock’s closing price on Wednesday, a day before media reports emerged of a deal between the two.”
  • “Shares of Albertsons was down about 6% in morning trading, after closing up 11% on Thursday, while Kroger’s stock was down about 3%.”
  • If the deal is terminated, Kroger will have to pay Albertsons $600 million.
  • After the deal closes, Rodney McMullen will remain CEO of the combined company.