Kroger and Albertsons Co. come to a definitive agreement, workers and consumers react
Six attorneys general, including Rob Bonta of California, asked the United States District Court for the District of Columbia to stop Albertsons Co. from paying its private equity shareholders a $4 billion dividend ahead of the proposed merger with Kroger.
“This dividend would cripple Albertsons’ ability to operate its stores, threatening the jobs of thousands of essential workers and making groceries more expensive and scarcer for millions of families,” said Kathy Finn, UFCW Local 770 president, which represents union members in parts of Los Angeles County.
The merger, if completed, would bring most of the Santa Clarita Valley’s grocery stores under the ownership of one company. The possibility has prompted some observers and labor union representatives to raise concerns about reduced competition and jobs.
The attorneys general’s filing states that if the agreement goes through, specifically the $4 billion payout to Albertsons Cos. shareholders, it will restrict the company’s abilities to operate its stores and compete meaningfully with Kroger while the merger is reviewed by federal regulators.
The timing of the legal action was necessary due to the fact that the merger indicated the proposed payout would take place on Monday, according to UFCW officials. This action followed that of Washington state’s attorney general, who filed a lawsuit Tuesday in King County Superior Court.
“A lack of cash will hamper Albertsons’ ability to compete in the short term,” the filing states. “Albertsons will be unable to respond effectively to shifts in the market through promotions and advertising more generally … and be unable to make necessary investment into their stores, or heavily disincentivized from doing so.”
The two nationally known food companies announced their definitive agreement to merge to expand their customer reach and improve on their ability to deliver fresh and affordable food to approximately 85 million households in late October.
According to UFCW, the proposed merger buried the fact that Albertsons would include a $4 billion payout to shareholders. If the merger is rushed to completion, UFCW members reiterated it would negatively impact workers and consumers.
Under the terms of the merger agreement, which was unanimously approved by the board of directors of each company, Kroger will acquire Albertsons Co. for approximately $24.6 billion. In addition, Kroger will assume approximately $4.7 billion of Albertsons’ debt.
“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders,” said Rodney McMullen, Kroger chairman and chief executive officer, who will continue in his role for the combined company, in a prepared statement.
“Albertsons Co. 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 larger and non-union competitors,” McMullen added.
Kroger owns an assortment of grocery stores including Baker’s, City Market, Dillons, Food 4 Less, Fred Meyer, Fry’s, Gerbes, Jay C Food Store, King Soopers, Kroger, Mariano’s, Metro Market, Pay-Less Super Markets, Pick’n Save, QFC, Ralphs, Ruler and Smith’s Food and Drug.
Albertsons Cos. owns Albertsons, Safeway, Vons, Jewel-Osco, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s Food Lovers Market.
According to a prepared statement, together the companies employ more than 710,000 associates and operate a total of 4,966 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies and 2,015 fuel centers.
“The combination creates a premier seamless ecosystem across 48 states and the District of Columbia, providing customers with a best-in-class shopping experience across both stores and digital channels,” reads the statement regarding the merger.
According to Kroger officials, the company has a track record of lowering prices, improving the customer experience and investing in its associates and communities.
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. An incremental $1.3 billion will also be invested into Albertsons stores to create a better customer experience.
In addition, Kroger will look to build on its investments in associate wages, training and benefits. In its statement, Kroger notes it invested an incremental $1.2 billion in associate compensation and benefits since 2018.
The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after closure of the merger. But, workers are worried about how the merger will impact them.
On Oct. 26, UFCW Locals 770, 5, 324, 367 and 3000, and Teamsters 38 issued a joint statement recognizing the actions of state attorneys general to protect workers and consumers from the possible merger. UFCW Local 770 represents workers in California.
The labor union believes any effort to rush the merger threatens thousands of jobs of essential grocery store workers and millions of shoppers who would suffer from reduced competition, reduced choice and increased costs in markets across the United States.
In a letter, six attorneys general — including Bonta — demanded Albertsons Co. delay its $4 billion payout to stockholders until the state attorneys general and the Federal Trade Commission complete their final review of the proposed merger.
“Californians are feeling the high cost of inflation every time they pull out their wallet at the grocery store checkout,” Bonta wrote in a letter addressing the merger. “With nearly 5,000 stores between them, Albertsons and Kroger are two of the larger grocery chains in the United States.”
“Their proposed merger requires careful review — to ensure their customers and employees do no pay a price through higher grocery bills, food deserts and lower wages. I, frankly, have a hard time seeing how Albertsons would be able to continue to compete — as it is obliged to do during the pendency of merger review — after giving away a third of its market share.”
In the SCV, when the merger is complete, most of the grocery stores in the valley would be under the ownership of Kroger — Vons, Ralphs and Albertsons.
Stores not included in the merger would include Aldi, Trader Joes, Costco, Vallarta, Whole Foods and other independently owned grocery stores.
“It’s becoming a monopoly,” said Vicki Ward, of Saugus, who was shopping at Albertsons Tuesday afternoon. “They’re going to raise prices. Probably close some stores and fire some people as usual.”