Kroger unveils $24.6 bln deal to create supermarket giant

NEW YORK

Grocery chain Kroger will acquire smaller rival Albertsons in a $24.6 billion transaction has announced that would create a supermarket giant but could face tough regulatory scrutiny.

The transaction, which unites two companies with some 710,000 employees and 5,000 stores in the United States, aims to take advantage of economies of scale to compete more effectively with giants like Walmart and Amazon.

But shares of both companies fell on Oct. 13 as analysts cautioned that the transaction could face a tough once-over from

Biden administration regulators, who have adopted a skeptical approach to large mergers.

In this case, both Kroger and Albertsons are consumer-facing companies. The deal also comes as the U.S. economy contends with grinding inflation.

In uniting, the two companies would have a combined customer base of about 85 million households, boosting its consumer data holdings and enabling some $1 billion in annual cost savings, executives said on a conference call with analysts.

These include “synergies” through improved sourcing, supply chain efficiencies and administrative savings, said Kroger Chief Financial Officer Gary Millerchip.

The companies pledged that the savings would enable them to “invest in lowering prices for customers,” they said in a press release.

But Morningstar analyst Zain Akbari predicted that the overlap between the companies in many markets would lead “regulators to scrutinize a transaction closely,” he said in a note earlier this week following reports of merger talks.