Bloomberg News reported early Thursday morning that Boise-based Albertsons is in talks to merge with Cincinnati-based Kroger. The news outlet provided little additional context, but said the unnamed sources said a deal could be done this week.
Kroger has more than 2,700 supermarket locations across the nation and is the number three seller of groceries, ranked by revenue Its brands include Fred Meyer, Smith’s, QFC, Ralphs, and others.
Albertsons has 2,250 stores and is the nation’s eighth-largest seller of groceries.
Bloomberg cautioned that a deal may not move forward, but if it does, could be announced this week. Albertsons is set to report its quarterly earnings on Tuesday. Bloomberg did not say which company would be the surviving entity – but Kroger is the largest of the two organizations.
Albertsons has been under a strategic review since February of this year. The company’s CFO said this summer that it was taking a close look at its real estate assets, and the company telegraphed it may make a move on the land and stores it owns.
Albertsons is what’s known as a “controlled company,” which puts a few critical investors in the driver’s seat. Cerberus Capital Management is by far the largest shareholder in the sprawling grocery company, holding 31.4% of the company’s shares, followed by real estate fund Lubert-Adler Management and investment firm HPS Investment Partners. Some of those investors have been part of a lock-up agreement that prevents them from selling shares. The lock-up agreement was extended last month to October, which signaled the company was still working on a solution to its strategic review.
Fully combing Albertsons and Kroger would likely face significant regulatory scrutiny. With more than 5,200 combined stores, the two companies would rival Walmart in size – and could potentially have a market position in some areas of the country the Federal Trade Commission could take issue with. The Bloomberg reporting didn’t indicate if the companies might spin off some stores, if they combine.
Albertsons has been sold before. It was split in pieces in 2006, with stores being sold to Supervalu, CVS, and the Cerberus-led coalition. Cerberus later acquired the stores sold to Supervalu, and later purchased Safeway, forming the current company.
Albertsons Companies timeline
1915 – Skaggs Cash Store in American Falls, Idaho by MB Skaggs.
1926 – Skaggs, Safeway merge – the combined company takes Safeway name.
1939 – Albertsons founded in Boise by Joe Albertson, a former Safeway manager – in partnership with LS Skaggs, MB’s brother.
1969 – Albertsons & Skaggs Drug Centers (started by LS Skaggs) form a joint venture for grocery/drug store concept.
1977 – Albertsons & Skaggs Drug Centers part ways amicably.
1978 – Skaggs & American Stores merge, taking the American Stores name.
1999 – Albertsons buys American Stores, and briefly becomes the nation’s largest grocer.
2001 – Larry Johnston hired as Albertsons CEO after a career at GE. Immediately cuts staff by 20%, closes hundreds of stores and pulls out of markets like Houston & New Orleans.
2006 – After Johnston’s efforts fail, a diminished Albertsons is split in three pieces and sold off: Standalone drug stores went to CVS, most grocery stores sold to Supervalu, and a small group of so-called “underperforming” stores sold to Cerberus Capital Mgmt.
2013 – After sputtering, Supervalu sells most of its stores to the Cerberus group.
2015 – Newly reunited Albertsons chain completes purchase of the larger Safeway – making it the nation’s second-largest grocer.
2020 – Albertsons Companies goes public on the NYSE.