Kroger agrees to buy rival grocery company Albertsons for $24.6 billion

Rival grocers Kroger and Albertsons connected Friday announced plans to squad up.

The companies said Kroger agreed to bargain Albertsons for $34.10 a stock successful a woody valued astatine $24.6 billion. Albertsons shares had closed Thursday astatine $28.63 aft surging connected reports that a woody was imminent.

Kroger is the 2nd largest grocer by marketplace stock successful the United States, down Walmart, and Albertsons is fourth, aft Costco. Together, Kroger and Albertsons would beryllium a person 2nd to Walmart.

Both companies' boards unanimously approved the agreement, which volition request regulatory approval.

The tie-up comes during a challenging clip successful the market industry. Supermarkets person raced to support up arsenic shoppers clasp caller ways of restocking the fridge. Companies person had to put successful automation, worker grooming and much arsenic consumers bounce betwixt browsing store aisles, ordering location deliveries and utilizing curbside pickup.

Grocers person besides been deed hard by inflation. Food prices have jumped 11.2% from a twelvemonth ago, according to the astir caller Bureau of Labor Statistics data. Companies person had measurement erstwhile to walk connected higher costs to customers and erstwhile to sorb them to enactment competitive.

Kroger and Albertsons by the numbers

The market manufacture is highly fragmented. Privately held determination grocers, specified arsenic H-E-B successful Texas and Publix successful Florida, stay powerfulness players and bid beardown loyalty. Relative newcomers similar discounters Aldi and Lidl, and Amazon's Amazon Fresh, person attracted customers, too. Plus, immoderate Americans banal up connected nutrient astatine warehouse clubs similar Costco, Walmart-owned Sam's Club and B.J.'s Wholesale.

Kroger and Albertsons besides each person galore store banners, including names that the operators person acquired implicit the years.

Kroger captured astir 8.5% of the $1.4 trillion marketplace for nutrient astatine location successful the U.S. past year, according to Morgan Stanley. Albertsons' stock was astir 5%. The adjacent 3 large players aft Albertsons are Ahold-Delhaize, Publix, Walmart-owned Sam's Club and Target. Ahold Delhaize's banners see Food Lion and Stop & Shop, on with Fresh Direct, an online grocer that it acquired.

To squad up, Kroger and Albertsons would request regulators to motion off. Regulators would look astatine wherever the companies person dominance and measurement if they would person excessively overmuch powerfulness if combined, said Eleanor Fox, a New York University prof who specializes successful antitrust and contention policy. A merger would beryllium little apt to get approved if they are the apical 2 grocers successful galore markets, she said.

Some of the companies' markets person important overlap, specified arsenic Southern California, Colorado, Seattle and parts of the Midwest and Texas, Simeon Gutman, a retail expert for Morgan Stanley, wrote successful a probe enactment Thursday. Other regions, specified arsenic the Northeast and Southeast, person precise small overlap.

"Albertsons Cos. brings a complementary footprint and operates successful respective parts of the state with precise fewer oregon nary Kroger stores," Kroger CEO Rodney McMullen said successful a quality merchandise announcing the deal.

The operation volition apt acquisition a lengthy reappraisal play by regulators and whitethorn necessitate store divestitures, Morgan Stanley's Gutman said.

Gutman besides cautioned connected the fiscal upside of the deal. Consolidation successful the market manufacture has not historically paid disconnected successful the signifier of higher profits, helium said. However, helium said the manufacture could beryllium astatine a tipping constituent wherever a large merger could besides assistance margins.