KR and ACI to Divest More Stores for Merger Completion

Grocery giants Kroger (NYSE:KR) and Albertsons (NYSE:ACI) have agreed to sell more stores to complete their long-awaited merger. In a recent development, the companies announced an amended divestiture plan to address antitrust regulators’ concerns about their merger.

In a new divestiture plan, the grocery retailers have agreed to sell 579 stores to C&S Wholesale Grocers, a wholesale grocery supply company. This represents an increase of 166 stores from the previous agreement. Moreover, Kroger will sell its Haggen banner to C&S as part of the arrangement.

This revised agreement came after the Federal Trade Commission (FTC) took legal action to block the merger. The federal and state antitrust regulators found that the initial divestiture proposal failed to adequately address competition concerns.

The Timeline of the Merger

Kroger and Albertsons announced a plan to merge in October 2022. According to the deal, Kroger agreed to acquire all of Albertsons’ outstanding shares for $24.6 billion, which also included Albertsons’ $4.7 billion in net debt.

In September 2023, the companies finalized a definitive agreement with C&S Wholesale Grocers. The deal with C&S included selling 413 stores and eight distribution centers. Additionally, the companies agreed to sell two offices and five private-label brands to facilitate regulatory approval.

Given the regulatory obstacles, the companies now expect to complete the merger in the first half of Kroger’s Fiscal 2024, ending on August 17, 2024.

Is Kroger a Buy or Sell Stock?

While Kroger’s acquisition of Albertsons faces regulatory headwinds, its stock has gained over 25% year-to-date. Kroger stock has a Moderate Buy consensus rating based on six Buy, five Hold, and one Sell recommendations.

Analysts’ average KR stock price target of $58.75 implies 3.20% upside potential from current levels.

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