(Bloomberg) — Kroger Co. posted its biggest increase in six months after agreeing to sell 413 stores to C&S Wholesale Grocers.
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C&S will pay $1.9 billion in cash for the stores, the companies said in a statement Friday, confirming a Bloomberg news report Tuesday. Closely held C&S is a major grocery wholesaler and also operates Grand Union and Piggly Wiggly stores.
Kroger is betting that its store sales will help convince the U.S. Federal Trade Commission that Albertsons Shopping, the retailer’s hub with Walmart Inc. and Amazon.com Inc. Profiles deals in video games, pharmaceuticals and mortgage software Chairman Lina Khan, examining the merger’s impact on grocery competition.
The deal with C&S is “a well-rounded buyer that can act as a strong competitor,” CEO Rodney McMullen said on a call with analysts and investors. We think we’ve addressed all the things and questions the FTC might have.
Kroger shares rose as much as 6 percent in New York trading, their most since March 2, in a sign that the company is cleaning up its operations ahead of the proposed merger. In addition to the store diversions, the supermarket chain also announced a $1.2 billion settlement for failing to properly track opioid prescriptions filled by the company’s in-store pharmacies.
See also: CVS, Walmart, Walgreens reach $13 billion opioid settlement
The Cincinnati-based company released financial results for its fiscal second quarter, reporting earnings of 96 cents a share. Wall Street estimated 90 cents, according to the average estimate of analysts compiled by Bloomberg. But with shoppers under increasing financial pressure, Kroger warned that same-store sales, excluding gas, could decline slightly in the second half of the year.
FTC review
The FTC could still sue to block the Albertsons deal. Labor unions and officials from various regions urged the regulator to oppose the merger, saying it would harm wages and competition. Some senators and members of Congress criticized the transaction.
Still, Kroger said the acquisition remains on track to close in early 2024, and McMullen has vowed to fight it in court if necessary. The divestiture plan ensures that no stores will be closed in connection with the Albertsons merger, he said. Front-line workers will continue to be employed and current collective bargaining agreements will continue.
Under the terms of the sale, Kroger may require C&S to buy an additional 237 stores in connection with efforts to obtain regulatory approval for the Albertsons deal, bringing the total to 650. Differences.
The stores that C&S buys are Kroger and Albertsons locations in 17 states, with a concentration in the Pacific Coast states and Colorado, with a significant number also in Arizona, Illinois, Louisiana and Texas. C&S also carries East Coast stores in Maryland, Virginia and Washington, DC.
The sale includes eight distribution centers and the QFC, Mariano’s and Carr’s banners, plus exclusive licensing rights to the Albertsons brand in Arizona, California, Colorado and Wyoming.
Shop footprint
On a combined basis, Kroger and Albertsons currently have a footprint of approximately 5,000 stores. Walmart has approximately 5,200 retail locations in the U.S., including approximately 600 Sam’s Club warehouse stores. Amazon, a powerhouse in categories such as diapers and some packaged goods, has embarked on the biggest shakeup of its grocery business since acquiring Whole Foods six years ago.
For C&S, the deal includes expansion into retail grocery stores. The Keene, New Hampshire-based company was founded in 2010. It bought 12 stores from Tops Markets in 2021 when the latter grocer merged with the Price Chopper/Market 32 chain. That separation was approved by the FTC.
“C&S recently expanded its retail operations by acquiring 11 Piggly Wiggly Midwest retail stores and hired a former retail executive with extensive retail experience to lead the retail efforts,” the regulator said at the time.
In its extensive wholesale business, C&S supplies more than 100,000 different products to more than 7,500 independent supermarkets, chain stores, military bases and institutions.
Bloomberg News previously reported that SoftBank Group Corp. will back C&S when it buys the stores.
–From Liana Baker and Michelle F. Davis help.
(An earlier version of this story has been edited to reflect the number of states covered by store sales.)
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