Kroger proposes deal to buy Albertsons in massive supermarket merger, what it means for consumers

Two major U.S. supermarkets will look to combine forces after a unanimous all-cash merger agreement was reached between the boards of Kroger and Albertsons.

Kroger, the second largest U.S. grocery store chain, would purchase the fourth largest, Albertsons, for an estimated total enterprise value of $24.6 billion, the company announced in a news release outlining the definitive agreement on Friday. "This combination will expand customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households with a premier omnichannel experience."

Combined, the stores employ more than 700,000 people across 5,000 stores.

The companies said they plan to continue with their shared track record to lower prices, enhance customer experience and increase associate wages and benefits.

In a statement, Kroger Chairman and CEO Rodney McMullen said, "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors."

He added that "as a combined entity, we will be better positioned to advance Kroger's successful go-to-market strategy" with respect to their seamless shopping experience, portfolio of brands, and personalized value and savings.

"Consistent with prior transactions, Kroger plans to invest in lowering prices for customers and expects to reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers," the company stated in its news release. "An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience."

The newly merged company said it "expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close."

One of the main pillars highlighted as a way to accelerate Kroger's go-to-market strategy is to create a broader selection of products with higher quality and better value.

"At a time when people are increasingly shopping for groceries and eating at home, Kroger and Albertsons Cos. will be better positioned to relieve the inflationary pressures facing shoppers with a combined portfolio of approximately 34,000 total private label products across premium, natural and organic, and opening price point brands," the news release stated.

"Kroger and Albertsons Cos. have strong track records of providing quality products at great value. The combined company's innovation capabilities, increased manufacturing footprint and expanded national reach will drive improved quality and efficiency allowing its Our Brands portfolio to accelerate growth and profitability while remaining affordable and accessible to customers."

Additionally, Kroger said it expects this deal will enable the company to "serve America with fresher food, faster" with its "expanded network of stores and distribution centers, as well as a broader supplier base."

"Utilizing Kroger's End-to-End Fresh initiative across a broader network will enable the combined company to optimize its supply chain to deliver the freshest products from field to table to more customers more quickly," the company stated. "By bringing together Kroger's Fresh for Everyone strategy and Albertsons Cos.' Customers for Life strategy, the combined company will expand its portfolio of fresh products, extend shelf lives and accelerate the penetration of its Fresh portfolio."

The company said it also hopes to continue its shared progress towards environmental, social and governance (ESG) principles.

'The addition of Albertsons Cos.' sustainability program and resources will accelerate progress on Kroger's Zero Hunger, Zero Waste social and environmental impact plan to create a more equitable and sustainable food system," the release said.

The transaction is expected to close in early 2024, subject to required regulatory clearance and closing conditions, according to the company's investor relations site.