In a Kroger supermarket, October 14, 2022 in Atlanta (Georgia, United States) (AFP/Archives/Elijah Nouvelage)
The American competition authority (FTC) took legal action on Monday against the merger of the supermarket giant Kroger with the Albertsons chain, estimating that it would harm consumers and employees.
“The FTC believes that the proposed transaction will eliminate intense competition between Kroger and Albertsons, resulting in higher prices for groceries and other essential products for the homes of millions of Americans,” it said Monday. in a press release.
She explains that what would be the “largest (merger) in the history of the United States” in the sector “will also result in lower quality products and services, while restricting consumer choice for stores where to do their shopping.
When this 24.6 billion repurchase was announced in October 2022, finalization was planned by early 2024 but remained subject to the approval of the regulatory authorities.
The FTC filed suit and opened the door to a federal lawsuit to block the merger pending the outcome of the proceedings.
The competition authority also argues that this merger would affect the hundreds of thousands of employees of the two groups by “immediately eliminating strong competition (…), which would threaten the ability of workers to obtain higher salaries, better social benefits and better working conditions.
Nay, Kroger immediately replied in a press release.
The group says preventing the merger “would harm precisely the people the FTC intends to serve: American consumers and workers.”
It claims to have reduced certain prices since 2003, thanks to a cumulative investment of five billion dollars for this purpose and the reduction of its gross margin by 5% over this period.
– Domination –
He pledged to spend $500 million to do the same after the merger as well as $1.3 billion for an upgrade of Albertsons stores.
He also intends to spend a billion dollars to increase salaries and benefits. According to him, no stores would close as a result of the merger but more than 400 would be sold to the wholesaler C&S Wholesale Grocers.
And, according to him, blocking this operation would benefit “larger, non-union distributors like Walmart, Costco and Amazon” who could “increase their domination” in the grocery sector.
The entity that would emerge from this merger is intended to compete with the giant Walmart, number one in mass distribution in the United States.
The FTC’s decision “is not really surprising,” said Neil Saunders, director at GlobalData.
The agency “flexes its muscles a lot more in the face of big mergers, and it was unlikely that a merger of this magnitude would escape its oversight and opposition,” he added.
But, according to him, certain arguments of the FTC such as the fear of a price increase “are not based on convincing elements” and “current market dynamics show that this vision is generally erroneous”.
This marriage “represents little threat” to competition, apart from in a few very localized sectors, said Mr. Saunders.
Kroger is present in 35 American states under its brand but also around ten others such as Harris Teeter, Dillons, etc. In 2022, it had sales of $148.3 billion across its more than 2,700 stores and employed 430,000 people.
In June 2023, Albertsons had nearly 2,300 supermarkets in 34 states under its banner but also around twenty others (Safeway, Vons, Randalls, etc.). In 2022, it had sales of $77.65 billion and had 290,000 employees.
The project involves the repurchase by Kroger of Albertsons shares at a unit price of $34.10, or nearly 33% more than the closing price the day before the project was formalized on October 14, 2022.
Albertsons shares jumped more than 11% after rumors of this acquisition on October 13.
The agreement also calls for Kroger to assume approximately $4.7 billion in debt on Albertsons’ books.
For its part, Albertsons has committed to paying its shareholders a cash dividend of up to $4 billion.
Around 8:00 p.m. GMT, Kroger shares fell 1.75% and Albertsons shares rose 0.35% on the New York Stock Exchange.
© 2024 AFP
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