The much-awaited merger between Kroger Company (KR) and Albertsons Companies (ACI) is facing heated opposition from anti-competitive authorities, forcing the duo to put the deal on hold. Since the announcement of the $25 billion deal in October 2022, the amalgamation of the two grocery stores has faced increased scrutiny from regulators worldwide.
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Kroger, Albertsons Put their Deal on Temporary Halt
In the latest ruling, Colorado Attorney General Phil Weiser has placed a temporary injunction, which the companies have agreed to. The state trial in Colorado is scheduled to begin on September 30, meaning that the companies will have to wait for months together before a final hearing comes. The duo had initially anticipated that the deal would close by mid-August 2024.
Meanwhile, the Federal Trade Commission (FTC) has filed a separate lawsuit against the merger in Oregon, which is set for hearing on August 26. The FTC is concerned that the proposed combination would result in lowered competition, increased food prices, and harm workers’ bargaining power. Some opponents even argue that the deal between the two large supermarket stores could lead to certain store closures and loss of jobs. Apart from Colorado, Washington State, the FTC, and eight other states filed lawsuits against the merger in February.
Meanwhile, Kroger and Albertsons are vouching that the merger would, in fact, lead to lower food prices, enhanced reach, wider options for consumers, and well-paying stable union jobs. They contend that the merger would enable the combined company to better compete with the likes of Amazon (AMZN) and Walmart (WMT), which operate their own grocery divisions.
To gain regulatory favor, the two companies even agreed to sell roughly 600 stores to C&S Wholesale Grocers in April. Plus, the combined entity intends to sell six distribution centers, one dairy plant, a few brands, and some non-store assets.
Hedge Funds are Reducing KR, ACI Exposure
Owing to the uncertainty related to the proposed merger, hedge funds seem to be reducing their exposure to Kroger and Albertsons stocks, as shown by TipRanks’ Hedge Fund Trading Activity tool.
Currently, KR has a Negative Hedge Fund Confidence Signal as hedge funds decreased their holdings of KR stock by 393,100 shares in the last quarter.
Similarly, ACI has a Very Negative Hedge Fund Confidence Signal as several hedge funds decreased their holdings of ACI stock by 2.6 million shares in the last quarter.
Is Kroger a Good Stock to Buy?
On TipRanks, KR stock has a Moderate Buy consensus rating based on seven Buys and four Hold ratings. The average Kroger Company price target of $59.44 implies 11.5% upside potential from current levels. Shares have already gained nearly 18% so far this year.
Is Albertsons Stock a Good Buy?
With one Buy and five Hold ratings, ACI stock has a Hold consensus rating on TipRanks. The average Albertsons Companies price target of $23 implies 12.9% upside potential from current levels. The stock has lost 10.4% year-to-date.
