The proposed $24.6 billion acquisition of Albertsons by Kroger has been put on hold for as long as six months.
The reason: "Active and ongoing dialogue with the Federal Trade Commission and individual state Attorneys General regarding our proposed merger and divestiture plan," which have not been resolved as quickly as expected.
The general expectation that an FTC decision on whether to allow the merger would come this week.
The timing change comes as Washington State Attorney General Bob Ferguson, as expected, filed a lawsuit aimed at blocking the proposed deal., saying it will "severely … limit vital competition that keeps grocery prices in check … This merger is bad for Washington consumers."
In its statement about the lawsuit, the AG's office wrote, "Even company executives have expressed that the merger might be illegal. After rumors of the proposed merger surfaced, a vice president with Albertsons wrote that 'you are basically creating a monopoly in grocery with the merger… [it] makes no sense.'
"An Albertson’s Human Resources director wrote of the merger: 'It’s all about pricing and competition and we all know prices will not go down'."
The statement from Kroger, Albertsons and C&S Wholesale Grocers (which has agreed to acquire more than 400 stores that would need to be divested to make the deal work) said, in part: "In light of our continuing dialogue with the regulators, we are updating our anticipated closure timeline. We currently anticipate that the closing will occur in the first half of Kroger's fiscal 2024. While this is longer than we originally thought, we knew it was a possibility and our merger agreement and divestiture plan accounted for such potential timing.
"We remain committed to closing the transaction and providing the meaningful and measurable benefits that we promised when we originally announced the transaction."
CNBC writes that "the proposed merger … has faced intense opposition from U.S. lawmakers and political leaders due to antitrust concerns. Those who oppose the merger worry that consolidation leads to higher prices and fewer shopping options for consumers, as well as job losses from a lack of marketplace competition."
Kroger has promised to lower prices and protect all front line jobs if the deal is approved; C&S has promised to respect union agreements in the store it would acquire.
- KC's View:
The betting here is that the FTC also will move to stop the deal, and that it will then be up to the courts to decide. It all depends on how regulators define the competitive issues at play here - while a merger may allow a combined Kroger-Albertsons to compete more effectively upstream with Walmart, Amazon and Costco, there almost certainly would be significant downstream competitive impact on smaller retailers and vendors. All the evidence is that the FTC is defining competition in aggressive terms, and there's every reason to think it will do so here.
I'd still put the odds that Kroger and Albertsons are able to conclude this deal successfully at no better than 50-50.