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Report: Albertsons and Kroger in talks for merger

The two chains are the second and fourth largest grocery sellers in the US by market share.

BOISE, Idaho — Albertsons or Fred Meyer - where do you shop?

It may not make a difference soon. The two grocery store giants are reportedly in talks for a merger, according to national news outlets

A deal may be finalized as soon as Friday. 

“In multiple industries, you sometimes get the top companies out there merging in order to get more size, and that’s really what we’re seeing here," Petso Financial Consultants founder, Dave Petso said. "It’s difficult to compete against a Walmart for sure, as far as size and coast-to-coast. So, these groceries need to get bigger, and we’re all seeing all the smaller chains get gobbled up over the years – and be under a giant umbrella.

Albertsons is based in Boise. They are the fourth-largest grocery seller in the US by market share. They operate over 2200 stores nationwide, and have banners like Safeway and Vons.

Cincinnati-based Kroger is the larger of the two chains, the second-largest grocery seller in the US by market share. They have 2800 stores, and banners like Fred Meyer and Ralphs.

Kroger generated roughly $137 billion in sales during the 2021 fiscal year, Albertsons raked in over $71 billion.

"This is the two top dogs outside of Walmart and Kroger by itself is so dominant, and Albertsons is no small player at all," Petso said. "These two together would be really difficult to say that it was good for the consumer. So, they really might face some antitrust issues.”

If there is an antitrust issue, the company may be forced to sell off stores in areas where there is a feeling of no competition.

The combined supermarket powerhouse would have a market valuation of about $47 billion, according to Reuters

Thursday, Albertsons (ACI) stock was up over 11%. Trading was halted for about five minutes in the morning following the reports due to volatility. 

"It’ll be great news for the executives who have tens or hundreds of millions of dollars to walk away with in stock options, things like that," Petso said. "We’ll have to see what happens with your rank-and-file employees. Once again, I don’t think it’s a positive for the consumer to have one less competitor out there to choose from. Especially as big a competitor as these two are.”

The Bureau of Labor Statistics released the Consumer Price Index for September on Thursday. The cost of food has increased 11.2% over the last 12 months. 

“It’s been unbelievable how much its gone up," Petso said. "We saw that announcement again today as to how much food prices went up. It’s been going up just under 1% per month. Obviously that’s a huge inflation rate, and it’s nine months in a row now that inflation has been high in food.”

The details of the deal are unknown. A CNBC report said that it could be an all-cash acquisition. 

"We’ll have to wait and see how it all comes out," Petso said. "There might be parts of each management team in the end when they ink the deal, but coming up with that much cash is an enormous problem for Kroger. So, I would be surprised if it’s an all-cash offer.”

While this deal may feel like it is coming out of nowhere, talks have likely been going on for some time.

"The fact that they’re actually letting it leak out says they’ve come pretty close to terms," Petso said. "I don’t think that their discussions are brand new."

As for the potential merger, Petso expects we will keep the same Albertsons brand that started in Boise. 

"I think we’ll still see the Albertsons brand out there, it’s well thought of and I don’t think they’ll want to change that," Petso said. "I think you’re going to see, if they do get this through the antitrust, you’re obviously going to see different things in the stores.”

KTVB reached out to representatives from Albertsons and Kroger for comment and have not heard back. The sources in the Bloomberg report asked not to be identified discussing confidential information.

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