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Kroger and Albertsons move ahead on store divestitures

Illustration of scales balancing a bag of groceries on each side

Illustration: Natalie Peeples/Axios

Kroger and Albertsons, which inked a $25 billion merger last fall, are moving forward with plans to divest between 250 and 300 stores to gain antitrust approval, Reuters reports, citing sources.

Why it matters: Whether the move is enough to satisfy regulators under pressure to block the deal remains to be seen.

Catch up fast: Though the deal allows for the separation of up to 650 locations, sources told Axios in November that the number would likely be closer to 375, and that the discrepancy was in effect a negotiating tactic.

Details: The stores likely to be sold are worth about $1 billion and are located across regions where the two companies operate, including the Pacific Northwest, Southern California, Phoenix and Chicago, for example.

  • Buyers could include Netherlands-based Ahold Delhaize, the parent of the Stop & Shop, Giant, Food Lion and Hannaford chains in the United States, Reuters says.

💭 Richard's thought bubble: While regional grocers are likely to make bids to fill out their footprints, there's also an opportunity for private equity, which has made a lot of money investing in supermarkets.

  • There's an obvious roll-up play here, given Southeastern Grocers, the parent of Winn-Dixie, is also on the auction block.

Of note: The merger would solidify Kroger's positioning as the largest pure-play supermarket chain in the U.S., putting it on more equal footing with larger rivals Walmart and Costco in terms of sales.

  • Amazon also factors in, though the e-commerce giant is still figuring out its grocery strategy.

Be smart: Though Kroger created a Spinco, an entity to which stores could be spun off if buyers either do not emerge or offer bids too low, the acquirer's preference is to sell locations, sources have previously told Axios.

The bottom line: This is just the latest update in a lengthy regulatory review process, with a 24-month drop dead date to get the deal done.

Albertsons and Kroger declined to comment.

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