Kroger and Albertsons Abandon Merger, Plan to Boost Share Prices Instead
Deal Falls Apart Amid Concerns Over Worker Wages and Competition
Within a day of their $25 billion merger’s falling apart in court, Kroger and Albertsons were each planning to move forward with share repurchases to boost their stock prices and reward investors.
Failed Merger Promised Lower Prices for Shoppers
America’s two largest grocery store operators had argued that they’d be better able to lower prices for shoppers by joining forces. Doing so, they said, would boost their negotiating power with suppliers and make it easier to take on much bigger retailers that compete with them in grocery sales, such as Walmart, Costco and Amazon.
Biden Administration Disagreed
The Biden administration disagreed, with the Federal Trade Commission saying in a lawsuit counting the merger that the deal threatened to drive down workers’ wages and bargaining power and reduce industry competition, potentially pushing food prices higher.
Judge Rejects Merger, Companies to Repurchase Shares
U.S. District Judge Adrienne Nelson of Oregon rejected the merger, citing a lack of evidence that it would lead to lower prices for shoppers. The chains’ promises to invest in lower prices were deemed "neither merger-specific nor verifiable." With the deal now dead, both Kroger and Albertsons announced plans to repurchase billions of dollars’ worth of their own shares to boost investor value.
Impact on Food Prices and Consumers
The costs of food eaten at home were 1.6% higher last month than they were the same time last year. Food prices tend to be volatile, but a broad range of items from produce to poultry notched increases in a wholesale inflation report that came in hotter than expected. Consumer groups and labor advocates are hailing the blocked merger as a victory for shoppers and workers.
Conclusion
The failed merger between Kroger and Albertsons means that the two chains will not be able to merge and potentially reduce competition in the grocery market. Instead, they will focus on repurchasing shares to boost investor value. This move is likely to benefit large shareholders, including institutional investors and billionaires.
FAQs
Q: What was the reason for the failed merger?
A: The Biden administration disagreed with the merger, citing concerns over worker wages and bargaining power and reduced industry competition.
Q: What did Kroger and Albertsons plan to do instead?
A: They plan to repurchase billions of dollars’ worth of their own shares to boost investor value.
Q: Will food prices be affected?
A: Food prices are already increasing, with the costs of food eaten at home 1.6% higher last month than the same time last year.
Q: What do consumer groups think about the failed merger?
A: Consumer groups and labor advocates are hailing the blocked merger as a victory for shoppers and workers.
