In an attempt to get regulatory permission for its almost $25 billion acquisition of Albertsons, a smaller competitor, Kroger (KR.N), said on Friday that it would sell over 400 grocery shops to C&S Wholesale Grocers.
Kroger will receive cash payments of around $1.9 billion for the store divestitures. According to the firm, to get regulatory approval for the acquisition, which is scheduled to conclude in early 2024, C&S may need to buy up to 237 more shops in certain regions.
“The firms probably were having problems finding a buyer is one of the primary negative reasons we heard on Kroger and Albertsons… According to J.P. Morgan analyst Ken Goldman, this significant obstacle is now behind us.
Even though Kroger reported decreased sales for the remainder of the year and took a $1.4 billion charge for an opioid lawsuit settlement in the second quarter, its shares increased by as much as 6%. The stock of Albertsons rose by 3%.
Since it was announced in October, the planned merger of the supermarket operators has been under intense scrutiny from consumer advocacy organizations and American legislators due to worries that it will lessen competition and increase food costs.
C&S, a company-sponsored by SoftBank (9984.T), is more of a supplier than a supermarket operator. Currently, it operates around twenty Grand Union and Piggly Wiggly shops.
CEO Rodney McMullen said at a post-earnings conference that “(C&S) brings experience with the merger process, having been an FTC-approved divestiture buyer in prior grocery transactions.”
Separately, Kroger, situated in Cincinnati, Ohio, said it expects the spending environment to “remain challenged” due to the ongoing high inflation rate.
It predicted similar sales, sans gasoline, to be at the low end of its yearly objective for the second quarter that ended on August 12 but fell short of Wall Street projections for same-store sales.
After deducting the costs associated with the opioid settlement, the business also switched to a loss of $180 million in the quarter, down from a profit of $731 million in the same period last year.
In contrast, it recorded a profit of 96 cents per share on an adjusted basis as opposed to LSEG projections of 91 cents per share.
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