The two largest grocery store chains in the country Announce A $1.9 billion divestiture plan on Friday includes the sale of 14 Albertsons-owned stores in Alaska to a New Hampshire-based grocery supplier and retailer.
Kroger, the parent company of Fred Meyer, and Albertsons, the parent of Carrs Safeway, said they plan to sell 413 stores in several states to C&S Wholesale Grocers. Experts say the proposed sale is aimed at helping the $24.6 billion merger win Federal Trade Commission approval.
Founded in 1918 and headquartered in New Hampshire, C&S is the largest wholesale grocery supplier in the United States, with more than 7,500 stores and military bases as customers. According to Forbes. Forbes said it is one of the country’s largest private companies, with revenues of $33 billion. It is too It operates Grand Union and Piggly Wiggly grocery stores in the Midwest and the Carolinas.
The Kroger and Albertsons announcement did not disclose the specific locations of the stores proposed for sale, including those in Alaska, but said Cars brand stores were part of the sale.
“As we are still in the regulatory process, we are not in a position at this time to share which specific locations will be divested to continue serving the community under a different owner,” a Kroger spokesperson said in an email statement. “We expect to be able to share these details closer to closing.”
The sale would likely include Carrs Safeway stores that operate near Fred Meyer stores, such as in Anchorage, experts said.
Unions in Alaska said they are trying to determine exactly which stores are planned for sale.
Grocery chain giants Announce Plans to merge last year.
The Alaska merger would combine the two anchor grocery stores in several areas of the state. Their Alaska operation consists of 12 Fred Meyers and 35 Safeways, state officials said. The brands compete in urban areas of the state, from Fairbanks to Anchorage to the Kenai Peninsula and Juneau.
The deal has raised concerns in Alaska that it could cause store closures, food prices to rise, increase risks to the fragile supply chain, and threaten the livelihoods of hundreds of workers. Unions representing workers at the stores, along with Democratic Rep. Mary Peltola and some state lawmakers, called on the federal agency to block the deal.
[Previous coverage: What the proposed Albertsons-Kroger merger could mean in Alaska]
The statement from Kroger and Albertsons said the planned sale ensures the merger will not result in store closures. All frontline partners will remain in their jobs and all existing collective bargaining agreements will continue, the statement said.
“After announcing our proposed merger with Albertsons Cos., we embarked on an aggressive and thoughtful process to identify a well-capitalized buyer who will act as an aggressive competitor and ensure that the sold stores and their associates continue to serve their communities in ways that they will continue to serve,” said Rodney McMullen, Kroger CEO. They do today. C&S achieves all of these goals. C&S is led by an experienced management team with an extensive background in food retail and distribution and has the financial strength to continue investing in associates and businesses for the long term. Most importantly to our agreement, C&S It is committed to honoring all collective bargaining agreements that include industry-leading benefits, retaining its frontline partners and continuing to invest for growth.
[Alaska unions urge Biden administration to block Albertsons-Kroger merger]
Officials at C&S and Albertsons could not be reached for comment Friday.
The sale may pass FTC muster
The FTC will take a closer look at the potential effects of the divestment in each region, including Alaska, said Doug Ross, an antitrust expert at the University of Washington School of Law.
An added benefit is that C&S is a large company with deep experience as a large grocery supplier, although its experience operating stores is more limited, Ross said.
“Kroger appears to have made what appears to be a very reasonable proposal,” Ross said. “But the FTC is going to stop by and find out.”
The stores most likely to be part of the divestiture are those in big cities, such as those within which Fred Meyer and Safeway’s Cars compete, said Brian Albrecht, an economist at the International Center for Law and Economics, a think tank in Portland, Oregon. Close distance from each other.
That’s because the divestiture is likely aimed at reducing anti-competitive concerns among federal regulators, he said.
One such stop is the Fred Meyer and Carrs Safeway stores in Midtown Anchorage which are just a hop across the Seward Expressway from each other.
Alaska is about to see a large percentage of stores sold out due to its small population, compared to other states, Albrecht said.
Albrecht said choosing C&S appears to be a good move by Kroger and Albertsons.
C&S has enough money to operate stores that can compete with a newly merged company. But he said it is not so large that its proposed acquisition of more than 400 stores would create its own antitrust issues.
“I think the FTC is going to be in a really tough spot if they don’t take this seriously as a solution,” he said.
C&S has created a retail holding company, 1918 Winter Street Partners, anticipating the completion of the divestiture plan, the Kroger and Albertsons announcement said.
The merger remains on track to close in early 2024, assuming it receives regulatory approval, the statement said. To seek regulatory clearance, Kroger said it may require C&S to purchase up to 237 additional stores in certain areas of the U.S., but it did not provide specific locations for those stores.
Kroger is the largest grocery chain in the country, followed by Albertsons. They own 5,000 stores nationwide serving more than two-thirds of American households. They employ 700 thousand workers.
Skeptics point to a previous acquisition
The divestiture and merger proposal would result in fewer stores in Alaska, said Rep. Zach Fields, D-Anchorage, who helped write a letter to the Federal Trade Commission last year opposing the merger.
He pointed to Safeway’s acquisition of Alaska-based Carrs chain for $330 million in 1999 as a precedent. The state of Alaska requested the sale of seven stores to a competitor as part of the deal.
Alaska Marketplace acquired six of those stores, but closed their doors in just over a year. Critics He confirmed That the state erred in allowing Safeway to sell underperforming stores.
“This merger is terrible for Alaska, even though few people on Wall Street will benefit from it,” Fields said Friday.
Graham Downey, a consumer advocate with the Alaska Public Interest Research Group, said the group still opposes the merger. He said companies can make well-intentioned promises like protecting workers, but they can break those promises once the deal is done.
“The improvements will not adequately prevent the harms to farmers, consumers and workers that corporate consolidation brings,” Downey said.
Downey also pointed to the failures of a previous divestiture involving the Alaska Marketplace to illustrate the problems a new company would face in Alaska.
“Supply chains in Alaska are tough,” he said. “There’s a reason there aren’t more grocery stores operating here. The decision to offload 14 Albertsons stores in Alaska may be an indication of that.”
alex Baker, The vice president of the United Food and Commercial Workers Local 1496 union said he could not comment on the divestment announcement. The Alaska local represents 2,500 workers in the state, including many grocery store employees, he said.
Baker said the union plans to meet soon with the United Food and Commercial Workers International Union, the largest grocery workers union in the United States, to discuss the impacts of the proposed sale. The Alaska Native and State Federation took positions opposing the merger.
Patrick Fitzgerald, political coordinator for Alaska Teamsters Union Local 959, said the union has questions about exactly which Albertsons stores will close. The union represents about 60 workers at the Carrs Safeway warehouse distribution center in Anchorage and 14 delivery drivers.
He said the union is unsure whether the sale will include the distribution center in Anchorage. If the warehouse closes in favor of a model that transports groceries directly from the Alaska port to stores, rather than housing them in a warehouse, it could eliminate a facility that holds several weeks’ worth of food and produce. These items could be essential during an unplanned emergency in Alaska, for example, if the ship-based supply chain is severely disrupted in the future.
Fitzgerald said the union is paying close attention to statements by Kroger and Albertsons to honor union contracts.
“It’s great to see that attitude, and we hope they follow through on it,” he said.
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