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Kroger's Deal to Acquire Albertsons Comes to a Halt: What's Next?
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The Kroger Co.’s (KR - Free Report) well-woven strategies have been reinforcing its position in the industry. We note that the company had entered into a deal to acquire Albertsons Companies (ACI - Free Report) for $24.6 billion in October 2022.
In the latest update, the U.S. District Judge, Adrienne Nelson, in Oregon has blocked this planned acquisition deal, according to the media reports. This is because the aforesaid deal might cut competition for the U.S. grocery shoppers, thereby leaving them prone to increased prices, per sources.
More on KR’s Latest Update
According to media sources, this suit was brought by the Federal Trade Commission (FTC), along with eight states and the District of Columbia. We note that both organizations had agreed to divest some of their stores to C&S Wholesale Grocers Inc. to address a few of the FTC's concerns.
Per sources, the FTC had made an argument that the proposed merger was in violation of the U.S. antitrust law and the divestiture of several stores to C&S Wholesale Grocers would not be sufficient to substitute the eliminated competition.
Per the media, the federal judge highlighted that it had evidence supporting the divestiture is not enough to compete with the merged firm and might meaningfully disadvantage C&S. The judge further cited the risk that few or the entire divested outlets will lose sales or close, which happened in the earlier C&S buyouts. The decision to halt the acquisition of Albertsons by Kroger worked in favor of the FTC.
We note that ACI has exercised its right to end the merger agreement with Kroger. This termination followed Adrienne Nelson and the King County Superior Court for the State of Washington issued injunctions regarding the merger deal on Dec. 10, 2024. Management further commented that it has been quite upset with the courts’ decisions. Hence, ACI looks forward to bolstering growth through its well-knitted strategic measures and boosting its stockholders’ value going forward.
More on the KR-ACI Deal
This $24.6-billion deal was anticipated to close during the fourth quarter of 2024. Per the deal, Kroger would acquire all the outstanding shares of Albertsons for an estimated total consideration of $34.10 per share, subject to certain reductions, including a special cash dividend of $6.85 paid out on Jan. 20, 2023.
In a bid to address certain regulatory concerns regarding the merger, Kroger and Albertsons had unveiled an amended divestiture package. The revised divestiture package included the sale of 579 stores to C&S, encompassing renowned banners such as QFC, Mariano's, Carrs and Haggen. The deal also involved the licensing arrangements for Albertsons and Safeway banners in specific states, ensuring a smooth transition post-merger.
The tie-up would have helped the companies to firm their positions in the competitive grocery space. The combined entity would benefit from a loyal customer base, digital investments, increased purchasing power and a broader product portfolio. The transaction might have offered a boost to KR’s strategy of Leading with Fresh, Accelerating with Digital, thus enabling the new organization to support its go-to-market strategy, comprising Fresh, Our Brands, Personalization and Seamless.
Currently, on a dismal note, the aforesaid deal has been blocked by the federal judge and the court proceedings concerning this might continue further, per the media reports. Hence, both companies have come to a standstill regarding the deal.
Image Source: Zacks Investment Research
We note that Kroger’s shares rose nearly 5% in trading hours yesterday. This current Zacks Rank #3 (Hold) player’s shares have gained 19.9% in the past three months compared with the industry’s 19.7% growth.
SFM has a trailing four-quarter earnings surprise of 15.3%, on average. The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of 12.2% and 29.6%, respectively, from the year-ago numbers.
Ingredion Incorporated (INGR - Free Report) manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank of 1. INGR has a trailing four-quarter earnings surprise of 9.5%, on average.
The Zacks Consensus Estimate for Ingredion’s current financial-year’s earnings indicates growth of 12.4% from the year-ago number.
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Kroger's Deal to Acquire Albertsons Comes to a Halt: What's Next?
The Kroger Co.’s (KR - Free Report) well-woven strategies have been reinforcing its position in the industry. We note that the company had entered into a deal to acquire Albertsons Companies (ACI - Free Report) for $24.6 billion in October 2022.
In the latest update, the U.S. District Judge, Adrienne Nelson, in Oregon has blocked this planned acquisition deal, according to the media reports. This is because the aforesaid deal might cut competition for the U.S. grocery shoppers, thereby leaving them prone to increased prices, per sources.
More on KR’s Latest Update
According to media sources, this suit was brought by the Federal Trade Commission (FTC), along with eight states and the District of Columbia. We note that both organizations had agreed to divest some of their stores to C&S Wholesale Grocers Inc. to address a few of the FTC's concerns.
Per sources, the FTC had made an argument that the proposed merger was in violation of the U.S. antitrust law and the divestiture of several stores to C&S Wholesale Grocers would not be sufficient to substitute the eliminated competition.
Per the media, the federal judge highlighted that it had evidence supporting the divestiture is not enough to compete with the merged firm and might meaningfully disadvantage C&S. The judge further cited the risk that few or the entire divested outlets will lose sales or close, which happened in the earlier C&S buyouts. The decision to halt the acquisition of Albertsons by Kroger worked in favor of the FTC.
We note that ACI has exercised its right to end the merger agreement with Kroger. This termination followed Adrienne Nelson and the King County Superior Court for the State of Washington issued injunctions regarding the merger deal on Dec. 10, 2024. Management further commented that it has been quite upset with the courts’ decisions. Hence, ACI looks forward to bolstering growth through its well-knitted strategic measures and boosting its stockholders’ value going forward.
More on the KR-ACI Deal
This $24.6-billion deal was anticipated to close during the fourth quarter of 2024. Per the deal, Kroger would acquire all the outstanding shares of Albertsons for an estimated total consideration of $34.10 per share, subject to certain reductions, including a special cash dividend of $6.85 paid out on Jan. 20, 2023.
In a bid to address certain regulatory concerns regarding the merger, Kroger and Albertsons had unveiled an amended divestiture package. The revised divestiture package included the sale of 579 stores to C&S, encompassing renowned banners such as QFC, Mariano's, Carrs and Haggen. The deal also involved the licensing arrangements for Albertsons and Safeway banners in specific states, ensuring a smooth transition post-merger.
The tie-up would have helped the companies to firm their positions in the competitive grocery space. The combined entity would benefit from a loyal customer base, digital investments, increased purchasing power and a broader product portfolio. The transaction might have offered a boost to KR’s strategy of Leading with Fresh, Accelerating with Digital, thus enabling the new organization to support its go-to-market strategy, comprising Fresh, Our Brands, Personalization and Seamless.
Currently, on a dismal note, the aforesaid deal has been blocked by the federal judge and the court proceedings concerning this might continue further, per the media reports. Hence, both companies have come to a standstill regarding the deal.
Image Source: Zacks Investment Research
We note that Kroger’s shares rose nearly 5% in trading hours yesterday. This current Zacks Rank #3 (Hold) player’s shares have gained 19.9% in the past three months compared with the industry’s 19.7% growth.
Stocks to Consider
Sprouts Farmers (SFM - Free Report) , which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SFM has a trailing four-quarter earnings surprise of 15.3%, on average. The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of 12.2% and 29.6%, respectively, from the year-ago numbers.
Ingredion Incorporated (INGR - Free Report) manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank of 1. INGR has a trailing four-quarter earnings surprise of 9.5%, on average.
The Zacks Consensus Estimate for Ingredion’s current financial-year’s earnings indicates growth of 12.4% from the year-ago number.