Kroger-Albertsons merger delayed

The proposed merger between retail giants The Kroger Co. and Albertsons Cos., as well as related divestiture with C&S Wholesale Grocers, is facing a setback following a lawsuit filed by Washington state's attorney general.

The companies now say they expect closing to take longer than initially expected but within the first half of Kroger’s 2024 fiscal year.

The legal action filed Jan. 15 by state Attorney General Bob Ferguson seeks to block the Kroger-Albertsons merger, citing concerns that the move will "severely limit shopping options for consumers and eliminate vital competition that keeps grocery prices low," according to a news release. This intervention adds a new layer of complexity to the high-stakes business deal that could significantly affect the retail and wholesale industries.

Kroger, Albertsons and C&S Wholesale Grocers issued a joint statement the same day.

“We remain in active and ongoing dialogue with the Federal Trade Commission and individual state attorneys general regarding our proposed merger and divestiture plan. We believe our merger with Albertsons and the comprehensive divestiture to C&S will result in the best outcomes for customers, associates and our communities," the companies said in the statement. "In light of our continuing dialogue with the regulators, we are updating our anticipated closure timeline. We currently anticipate that the closing will occur in the first half of Kroger’s fiscal 2024. While this is longer than we originally thought, we knew it was a possibility and our merger agreement and divestiture plan accounted for such potential timing. We remain committed to closing the transaction and providing the meaningful and measurable benefits that we promised when we originally announced the transaction.”

Kroger said in a news release that combining with Albertsons will mean lower prices and more choices for more customers.

"With a proven record of lowering prices year over year, Kroger will invest $500 million to reduce prices beginning day one, as well as an incremental $1.3 billion to enhance the customer experience," the companies said in a news release. "The merger will mean more fresh, affordable food is available to more people in more communities.

Related: Year in Produce 2023 — Industry continues to eye Kroger-Albertsons merger

Ferguson asserts that a proposal by Kroger and Albertsons to mitigate the merger's impacts, which includes selling off more than 100 stores in Washington, does not change the fact that Kroger "would still enjoy a near-monopoly in many markets in the state. In addition, the plan to sell the stores to a company that is primarily a wholesale supplier could set up many of the divested supermarkets to fail, endangering Washington jobs and further diminishing choices for Washington shoppers," according to the release from the attorney general's office.

“This merger is bad for Washington shoppers and workers,” Ferguson said in the release. “Free enterprise is built on companies competing, and that competition benefits consumers. Shoppers will have fewer choices and less competition, and, without a competitive marketplace, they will pay higher prices at the grocery store. That’s not right, and this lawsuit seeks to stop this harmful merger.”

Kroger said it remains committed to protecting good-paying union jobs, with no store closures or frontline associates laid off as a result of the merger. The Cincinnati-based company said it also will invest an incremental $1 billion to raise wages and comprehensive benefits for all associates after closing. This builds on the $1.9 billion in incremental investments the company has made in wages and comprehensive benefits since 2018, according to the release. Additionally after closing, Kroger said it would provide 700,000-plus part-time and full-time associates access to its continuing education benefit, which offers up to $21,000 of reimbursement toward higher learning or continued development. The combined company will also expand access to its Goldman Sachs Ayco financial coaching tool, the release said.

Related: Kroger, Albertsons to divest with C&S Wholesale Grocers to advance merger