Kroger, Target Trade Higher Amid Report The Companies Are Discussing A Merger

Shares of Kroger Co KR spiked more than 8 percent Thursday morning amid a report the grocer giant is in merger talks with department store Target Corporation TGT.

What Happened

Target and Kroger are in merger talks at a time when the entire grocery and food sector is looking at ways to combat Amazon.com, Inc. AMZN's "increasing hold" on the market, people familiar with the matter told Fast Company.

Talks between the two companies started last summer to explore a partnership, which would benefit Target's grocery business and give Kroger's customers more access to merchandise and e-commerce, Fast Company said. Discussions were revived last fall and were ongoing this year.

CNBC's Courtney Reagan, however, Tweeted that a "source close to the matter tells me there is no truth" to a combination of Target and Kroger. The Tweet said, "I can report the 2 companies have had meetings" although it was related to merely a Shipt partnership.

Why It's Important

Kroger's name has been mentioned multiple times in M&A rumors but nothing has materialized. For example, Kroger was rumored to have received interest from Dutch retailer Koninklijke Ahold Delhaize last October.

Kroger could in theory be exploring a combination of its business with another large department store or retail chain. The company reported in-line results in its fourth quarter, but a poor outlook for its full fiscal year.

What's Next

Despite Reagan's Tweet suggesting there are no M&A talks on the table, the stock was up about 3.3 percent at $24.16 in pre-market trading. Target was up about 1.7 percent at $70.10.

Related Links:

Perspective: If Amazon Wins The Grocery Wars, It Won't Be Because Of Prices

Amazon's Whole Foods Is Already Stealing Market Share From Walmart, Kroger And Costco

Image credit: Nicholas Eckhart, Flickr