Supermarket chains Kroger and Albertsons said Monday they will sell more of their stores in an effort to quell the federal government’s concerns about their proposed merger.
The companies now plan to sell 579 Kroger and Albertsons stores in markets where they overlap to C&S Wholesale Grocers, a New Hampshire grocery supplier and operator, for $2.9 billion. Under the initial divestiture plan, announced in September, C&S had planned to purchase 413 stores for $1.9 billion.
It’s unclear if the new plan will satisfy regulators. In February, the U.S. Federal Trade Commission sued to block the $24.6 billion merger between the grocery giants, saying the lack of competition would lead to higher grocery prices and lower wages for workers.
Kroger is the parent company of Denver-based King Soopers, Colorado’s largest grocery store chain, while Safeway is part of Albertsons Companies Inc.
The FTC also said the initial plan to divest 413 stores to C&S was “inadequate” and would give C&S a hodgepodge of unconnected stores and brands, leaving it ill-equipped to compete with a combined Kroger and Albertsons.
Under the updated plan, Kroger would sell its Haggen banner to C&S. C&S would also license the Albertsons banner in California and Wyoming and the Safeway banner in Arizona and Colorado. C&S would also get access to some private-label brands in the stores. Under the proposal, C&S would keep all of the stores open and honor any labor agreements.
“We are 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,” C&S CEO Eric Winn said in a statement.
But a coalition of unions representing Kroger and Albertsons workers said the bigger proposed divesture simply increases the challenges C&S would face “trying to operate a hodgepodge chain of retail stores.”
“They have no experience operating retail stores in these states, would still lack the IT, customer loyalty and manufacturing capabilities needed, and would most likely end up monetizing the real estate under many of these stores,” a coalition of United Food and Commercial Workers locals said in a statement.
The coalition includes UFCW Local 7, which represents union members in Colorado and Wyoming.
Kroger and Albertsons announced their planned merger in October 2022. The companies say it’s necessary so they can better compete with Walmart, Amazon and other big rivals.
Updated at 11:41 a.m. April 22, 2024, to add comment from union.
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