Kroger and Albertsons said Monday the two companies are increasing the number of grocery stores they sell to C&S Wholesale Grocers to address federal regulators' concerns about the impact of their proposed $25 billion merger on competition.
An additional 166 Kroger and Albertsons stores will be sold to C&S as part of an updated divestiture agreement between the three companies. The original divestiture plan included the sale of 413 stores, as well as eight distribution centers, two offices and five private label brands.
The new agreement will see C&S pay about $2.9 billion in cash for the stores — an increase from the $1.9 billion payout under the original divestiture plan. That acquisition would leave C&S with 579 stores plus access to the Albertsons Signature and O Organics private label brands.
"We have reached an agreement with C&S for an updated divestiture package that maintains Kroger's commitments to customers, associates and communities, addresses concerns raised by regulators, and will further ensure that C&S can successfully operate the divested stores as they are operated today," Kroger CEO Rodney McMullen said in a press release.
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"Importantly, the updated divestiture plan continues to ensure no stores will close as a result of the merger and that all frontline associates will remain employed, all existing collective bargaining agreements will continue, and associates will continue to receive industry-leading health care and pension benefits alongside bargained-for wages," McMullen added.
C&S Wholesale Grocers CEO Eric Winn said that the company is "confident this expanded divestiture package will provide the stores, supporting assets and expert operators needed to ensure these stores continue to successfully serve their communities for many generations to come."
Winn added that C&S looks forward to "welcoming storied banners, quality private label brands, and a team of experienced retail associates into the C&S family. This amended agreement enables C&S's heritage of selection, value and customer service to continue our legacy of braggingly happy customers."
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Kroger first announced its plan to buy Albertsons in October 2022, and the initial divestiture package was announced in September 2023.
The Federal Trade Commission (FTC) and eight states filed a lawsuit in February 2024 to block the proposed merger, arguing the deal would undermine competition in the grocery store market by raising prices for consumers, closing stores and resulting in job losses.
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A district court in Oregon will hold a hearing in August on the FTC's request for a preliminary injunction to block the deal.
Tom Geiger, spokesperson for UFCW 3000, which represents Kroger and Albertsons unionized employees in Washington, Oregon and Idaho, said that members are concerned that C&S might resort to selling the real estate of stores if it lacks the necessary IT infrastructure, customer loyalty and manufacturing capabilities.
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Reuters reported that legal advisers close to the transaction and divestiture plan said Kroger and Albertsons are trying to provide C&S with a business that it can run effectively by increasing distribution capacity that will create a density of local store networks to support its business.
Reuters contributed to this report.
