Kroger has announced a deal to merge with Albertsons to form a mega grocery chain

New York
CNN business

Kroger announced it will merge with Albertsons in a $24.6 billion deal, creating one of the largest grocery chains in the United States, with nearly 5,000 stores.

“The combination creates an outstanding ecosystem across 48 states and the District of Columbia that provides customers with the best shopping experience in stores and across digital channels,” Kroger said in a press release.

The combined company will give it greater scale to compete against Amazon, Costco, Walmart and smaller grocers. Traditional grocery chains are losing market share to lower priced companies such as Aldi, Trader Joe’s, Grocery Outlet due to very high inflation and rising costs.

Grocery store prices continued to rise last month, adding even more pressure to shoppers’ wallets. The household food index, a proxy for grocery store prices, rose 0.7% in September from the previous month and a staggering 13% over the past year, according to new government data released on Thursday.

Kroger ( KR ) said it would buy Albertsons for $34.10 per share — about a 30% premium over the grocery chain’s average share price over the past month. Shares of Kroger ( KR ) fell 2% in premarket trading, while Albertsons rose more than 11%.

First approved by the company’s two boards of directors, the merger still needs regulatory approval. To help streamline that process, the company will not include more than 375 stores in the deal, and will spin them off into a new company “to create a new, lean competitor,” the chains said in a statement.

In a statement, Kroger CEO Rodney McMullen noted that Albertsons “brings a complementary footprint and operates in many parts of the country with few or no Kroger stores.” He will become the CEO of the newly merged company.

The merger is expected to close in early 2024.