Kroger Co and Albertsons Cos Inc are edging closer to finalizing an agreement aimed at obtaining approval from U.S. regulatory authorities for their planned $24.5 billion merger. This arrangement entails the sale of over 400 grocery stores to C&S Wholesale Grocers for approximately $2 billion, as reported by individuals familiar with the situation.
This agreement would significantly expand the presence of privately-owned C&S Wholesale Grocers, which primarily functions as a supplier rather than an operator of grocery stores. Currently, C&S operates roughly two dozen stores under the Grand Union and Piggly Wiggly brands.
According to one of the sources, SoftBank Group Corp, the Japanese investment conglomerate, is engaging in discussions with C&S to potentially provide financing for a portion of the deal.
Although SoftBank typically leans toward technology-related transactions, it has a connection to C&S’s executive chairman, Rick Cohen. This link stems from its joint venture with the warehouse automation firm Symbotic Inc, where Cohen holds the position of CEO.
According to the sources, the stores that Kroger and Albertsons intend to divest are primarily located in the Pacific Northwest and the Mountain states, with additional locations in California, Texas, Illinois, and along the East Coast.
They mentioned that an agreement could potentially be reached as soon as this week. However, it remains uncertain whether such an agreement will address regulators’ concerns regarding the potential for a merged Kroger and Albertsons to exert excessive control over grocery prices.
The sources asked to remain anonymous due to the confidential nature of the negotiations. Kroger and Albertsons chose not to provide any comments on the matter. C&S and SoftBank did not respond to requests for comment. Bloomberg News reported on the discussions involving C&S, Kroger, and Albertsons on Monday, as well as SoftBank’s participation, but did not provide any details regarding the terms of the deal.
Earlier, Kroger and Albertsons had indicated the possibility of divesting anywhere from 100 to 375 stores by establishing a new company that would be owned by Albertsons shareholders. In a regulatory filing, Kroger stated that the maximum number of stores that could be divested was raised to 650.
C&S has been actively seeking to establish its own retail presence in a highly competitive grocery supply market. It faced a significant setback when one of its major customers, Ahold Delhaize, opted for self-distribution in 2019, resulting in the loss of a significant business relationship.