Updated Oct 14, 2022 - Economy

Kroger snaps up Albertsons in grocery megamerger

Photo: Brandon Bell/Getty Images

Kroger said Friday morning it will buy Albertsons in a deal that would combine two of the nation's largest grocery chains.

Driving the news: The deal carries an enterprise value of $24.6 billion and combines the second and fourth largest U.S. food retailers, with around 8% and 5% market share, respectively.

  • Walmart is the leader with 25%.

The big picture: Grocers are dealing with a slew of challenges, including runaway inflation and competition with value chains and online retailers.

  • "Such consolidation would, in theory, improve the economics for both businesses giving them even more buying power than they currently enjoy and providing an opportunity for significant savings in central operations," GlobalData retail analyst Neil Saunders wrote Thursday.
  • "In an environment where Amazon and Walmart are the mega giants pushing deeper into groceries and grocery delivery, teaming up seems like a potential strategy to stand up against them," Axios Closer co-author Hope King writes.

By the numbers: Kroger had about 2,800 supermarkets, distribution warehouses and food production plants as of Jan. 29, including its namesake stores, Harris-Teeter, Fred Meyer and Roundy's

  • Albertsons had 2,276 stores as of Feb. 26, including its namesake brand, Safeway, Jewel-Osco and Acme.

The big question: Will the deal face antitrust scrutiny?

  • "There is overlap in the two store estates, particularly in the West, and there will, no doubt, be some closures if a merger goes ahead," Saunders wrote.

Our thought bubble: "While the grocery sector is competitive, the deal will likely receive antitrust scrutiny, given President Joseph Biden's order earlier this year articulating that antitrust agencies increase enforcement to prevent a rise in consumer prices," Axios Pro: Retail Deals reporter Richard Collings writes.

(Editor's note: This story has been updated with new details, including market share data from CFRA Research, additional commentary and more recent stock trading levels)

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