Harris Teeter parent Kroger to buy Albertsons grocery store chain in $25 billion deal

Harris Teeter’s parent company Kroger and Albertsons announced Friday that the two grocery store chains have entered a $24.6 billion merger agreement.

The deal with Kroger, based in Ohio, and Albertsons in Idaho, would create one of the largest grocery store chains in the U.S. reaching 85 million households, Kroger said. The massive deal is likely to face intense regulatory scrutiny.

Combined, the two grocers have 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies, 2,015 fuel centers and employ over 710,000 people, Kroger said Friday in a news release.

The terms of the agreement were unanimously approved by the board of directors of each company, with Kroger acquiring all of the outstanding shares of Albertsons Companies Inc., a value of $24.6 billion, Kroger said in a statement. That includes the assumption of approximately $4.7 billion of Albertsons’ net debt.

“Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores,” Kroger Chairman and CEO Rodney McMullen said in a statement.

McMullen will serve as chairman and CEO of the combined company.

Albertsons Cos. also will create a spin-off store at closing in conjunction with the regulatory clearance of the merger transaction, according to a news release. That new company will include 100 to 375 stores, officials said during a press conference Friday morning, to try to alleviate anti-competitiveness concerns.

Kroger’s Fred Meyer unit, based in Portland, competes directly with Albertsons stores in Boise, according to The Idaho Statesman, a McClatchy publication.

The two companies generate a combined $210 billion a year in revenue and $3.3 billion in profit, according to the news release. The transaction is expected to close in early 2024, subject to the receipt of required regulatory clearance and other closing conditions, Kroger said.

More about the Kroger-Albertson deal

Here are some of the other key points from Kroger’s news release and press conference Friday:

▪ Kroger would buy all outstanding Albertsons shares for $34.10 in cash and other consideration, a price that values Albertsons at $24.6 billion. Albertsons would contribute $6.85 of that in special cash dividends totaling $4 billion. The purchase price may be reduced by the per-share value of the new spin-off.

▪ Kroger plans to invest $500 million in cost savings into lower prices for customers.

▪ Kroger also will invest $1 billion to raise worker wages and benefits.

▪ The merger expands the network of stores and distribution centers to optimize store supply chains for broader brand choices and faster delivery.

▪ Kroger has $17.4 billion of financing from Citi and Wells Fargo. At closing, Kroger plans to fund the transaction using a combination of cash and proceeds from new debt financing.

▪ Albertsons was founded 83 years ago by Joe Albertson with one store in Boise. Kroger started in 1883 when Barney Kroger opened a store in downtown Cincinnati, according to the company’s website.

About Harris Teeter

Matthews-based Harris Teeter has over 250 stores and 35,000 employees in seven states.

With 60 stores in the Charlotte region, Harris Teeter is the No. 2 grocer by market share behind Walmart, The Charlotte Observer previously reported.

It’s unclear what effect the merger will have on the North Carolina-based grocer.

Kroger completed the $2.5 billion purchase of Harris Teeter in January 2014.

This story was originally published October 14, 2022 at 9:46 AM.