- 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.
- Photo Via Company
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