Kroger, Albertsons deal ‘very likely dead,’ says Roth MKM

Roth MKM analyst Bill Kirk believes Kroger’s (KR) proposed acquisition of Albertsons (ACI) is “very likely dead” after a federal judge ruled in favor of Federals Trade Commission by granting an injunction for the proposed merger. Administrative proceedings would be lengthy, with outside dates passed, there is currently no active merger agreement, and some financing would have to be extended, the analyst tells investors in a research note. The firm says that while an appeal of the injunction could be heard by a Federal Circuit Court, “investors should consider this process finalized.” From Kroger’s perspective, some near-term challenges are removed, but the importance of increasing scale and digital reach remains, contends Roth. From Albertsons’ perspective, store and region closures are likely, price gaps need to narrow, and insiders are likely to continue seeking liquidity, says the firm. It reiterates a Neutral rating on Kroger and Buy on Albertsons.