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Two Grocery Chains Lined Up for Merger

The news has been reported the last few days informing us that two of USA's most popular grocery stores, Kroger and Albertsons, have announced plans to join forces, according to various news sources.

CNBC:

“Grocers and rivals Kroger, and Albertsons, last Friday revealed plans to join with each other.”

The two companies announced that Kroger had agreed to purchase Albertsons for $34.10 per share in a deal that is worth $24.6 billion. Albertsons shares closed on Thursday at $28.63 after rising on reports the deal could be on the verge of being completed.

Kroger is the second largest grocer with a market share of 23% in the United States, behind Walmart, while Albertsons is fourth, following Costco. When combined, Kroger and Albertsons would be in a close second place to Walmart.

The two boards of the companies have unanimously approved the arrangement and it will require approval from the regulator.

It's impossible to underestimate how huge this new “Frankenstein” monster of a food chain will be and how it could impact the way Americans purchase food across the nation. Here are the numbers on both businesses, courtesy of the AP:

“Kroger, located within Cincinnati, Ohio, operates 2800 stores across 35 states, with brands such as Ralphs, Smith's, and Harris Teeter. Albertsons is headquartered in Boise and has 2273 stores in 34 states including brands such as Safeway, Jewel Osco, and Shaw's. Together, the businesses employ about 710,000 employees.”

The deal is likely to face intense scrutiny by U.S. antitrust regulators, especially in a period of high inflation in the price of food. In the past, both the Justice Department and the Federal Trade Commission have already been working on amending merger guidelines in order to better identify and stop anti-competitive agreements.

The AP article provided more information regarding the company's plans:

“Kroger Chairman and Chief Executive Officer Rodney McMullen, who would keep these titles in the company that is merged, said the combination is expected to save around $1 billion annually due to less administrative cost, better production and distribution, as well as sharing investment in technological advancements. McMullen said the company would invest those savings to lower prices, more wages, and better stores.”

“We will take the learnings from each company to bring greater value and a better experience to more customers, more associates, and more communities,” McMullen declared on Friday during an investor conference call.

The announcement of the merger was made in a joint press release issued by the two companies on Friday.

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