Kroger/Albertsons $25B Merger Might Face Antitrust Challenge

Friday, Kroger Co KR agreed to acquire Albertsons Companies Inc ACI for $34.10 per share, implying a total enterprise value of approximately $24.6 billion, to establish a national footprint.
However, the U.S. Federal Trade Commission (FTC) could challenge the deal amid intensified antitrust scrutiny under the Biden administration.
"There is a significant risk of a challenge," said Andre Barlow of the law firm Doyle Barlow and Mazard PLLC. "This is the type of deal that the FTC wants to discourage."
To tackle the so-called concerns, the companies plan to divest some stores, Reuters reported, and Albertsons is ready to spin off a standalone unit to its shareholders immediately before the deal's close, expected in early 2024. The newly public company is estimated to comprise as many as 375 stores.
"We have a clear path to achieve regulatory approval with divestitures," company executives reassured investors on a conference call, adding that it was still too early to narrow down which markets the restructuring would occur.
Barlow said the FTC would still have questions about who would run the stores and whether they would have enough assets and purchasing power to compete effectively.
Still, some analysts were optimistic that the plan to divest stores would be enough.
Kroger said it expects to reinvest about half a billion dollars of cost savings from deal synergies to reduce prices. An incremental $1.3 billion will also be invested into Albertsons.
"The merger will accelerate our position as a more compelling alternative to larger and non-union competitors," the report quoted Kroger Chief Executive Officer Rodney McMullen.
Kroger will have to pay Albertsons $600 million if the deal is terminated.
Price Action: KR shares are up 0.79% at $43.50 during the premarket session on the last check Monday.
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