The Kroger Co. and Albertsons Companies have amended their agreement with C&S Wholesale Grocers for the sale of assets in connection with their proposed merger previously announced on Oct. 14.
This amended package modifies and builds on the initial divestiture package that was announced on Sept. 8.
The amended divestiture package responds to concerns raised by federal and state antitrust regulators regarding the original agreement. The enhanced divestiture package includes a modified and expanded store set and additional non-store assets to further enable C&S to operate competitively following the completion of the proposed merger. The companies believe the amended divestiture package will bolster their position in regulatory challenges to the proposed merger, including pending court proceedings.
“We have reached an agreement with C&S for an updated divestiture package that maintains Kroger’s commitments to customers, associates and communities, addresses concerns raised by regulators and will further ensure that C&S can successfully operate the divested stores as they are operated today,” said Rodney McMullen, Kroger’s chairman and CEO.
“Importantly, the updated divestiture plan continues to ensure no stores will close as a result of the merger and that all frontline associates will remain employed, all existing collective bargaining agreements will continue, and associates will continue to receive industry-leading health care and pension benefits alongside bargained-for wages. Our proposed merger with Albertsons will bring lower prices and more choices to more customers and secure the long-term future of unionized grocery jobs.”
C&S CEO Eric Winn said, “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 is a leader in the grocery industry, and we are excited for this expansion of our current retail business, which is a key part of our long-term growth strategy. We look forward to welcoming storied banners, quality private label brands and a team of experienced retail associates into the C&S family. This amended agreement enables C&S’s heritage of selection, value and customer service to continue our legacy of braggingly happy customers.”
Transaction details
The updated divestiture package increases the total store count by 166 to include 579 stores that will be sold to C&S and continue operating as they do today.
It maintains the sale to C&S of the QFC, Mariano’s and Carrs banner names. Under the amended agreement, Kroger will also sell the Haggen banner to C&S. Stores under these banners that are retained by Kroger will be re-bannered into one of the retained Kroger or Albertsons Cos. banners following the close of the transaction.
Under the amended agreement, C&S will license the Albertsons banner in California and Wyoming and the Safeway banner in Arizona and Colorado. In these states, Kroger will re-banner the retained Albertsons and Safeway bannered stores following the closing of the merger. Kroger will maintain the Albertsons and Safeway banners in the remaining states.
The stores (regardless of banner) will be sold by Kroger to C&S following the closing of the merger with Albertsons Cos.
In connection with the additional stores being conveyed to C&S, the updated divestiture package includes increased distribution capacity through a combination of different and larger facilities, as well as expanded transition services agreements to support C&S and the addition of one dairy facility.
The amended divestiture package also expands the corporate and office infrastructure provided to C&S given the increased store set to ensure C&S can continue to operate the divested stores competitively and cohesively. All fuel centers and pharmacies associated with the divested stores will remain with the stores and continue to operate.
The amended agreement maintains the divestiture of private label brands Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro to C&S. The revised agreement also provides C&S with access to the Signature and O Organics private label brands.
Subject to fulfillment of customary closing conditions, including Federal Trade Commission and/or other governmental clearance, and the completion of the Kroger-Albertsons merger, C&S will pay Kroger an all-cash consideration of approximately $2.9 billion, including customary adjustments.
Read more corporate chain store news from The Shelby Report.
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