Kroger and Albertsons are nearing a deal that they hope will get the clearance from the US regulatory for their reported $24.5 billion merger. The merger between two of the largest food and drug retailers in the United States will involve selling more than 400 stores to C&S wholesale Grocers for a reported amount of nearly $2 billion.
Citing its sources, Bloomberg reported that New Hampshire-based C&S wholesale grocers is in talks with Kroger-Albertsons to buy stores. For this purpose, C&S has called up Softbank Group co., a Japanese investment bank, to finance the deal.
Softbank usually goes for technology-related deals; However, the case with C&S is a bit different in a way that the latter’s executive chairman Rick Cohen also serves as the CEO for the JV between Softbank and Symbiotic Inc.
The reports didn’t mention the exact number of stores C&S wholesale grocers is willing to purchase, it may go for a couple of or all of the 400 stores up for sale. According to Reuters, Kroger and Albertsons are planning to sell the stores that are primarily located in the Mountain states and Pacific Northwest. Some of these stores are also located along Illinois, California, Texas, and the East Coast.
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The merger Deal
The deal between Cincinnati based Kroger and Idaho-based Albertsons, to acquire the letter one, was made public in mid-October. This deal would make Kroger, one of the largest food and drug retailers with an annual revenue of $210 billion and 5,000 stores. The retailer would also become one of the largest employers in the United States with more than 710,000 workers in 48 states and the District of Columbia.
Initially, Kroger and Albertsons had projected to divest somewhere between 100 to 375 stores to successfully secure the regulatory clearance for the merger. The agreement includes a ceiling of 650 store divestitures, at which point they would revise the transaction, which is currently expected to complete by the next year.
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The Late August Review
In a late August review, Kroger’s chairman and CEO Rodney Mcmullen said there have been plenty of businesses willing to buy the divested stores. He noted that Kroger and Albertsons are seeking financially sound businesses for the deal.
Mcmullen while talking to the news, said that they are looking for someone who has a lot of experience in this space, and has enough financial strength and capability to capitalize on the deal.
Being the country’s largest private grocery distributor, C&S wholesale Grocers supplies to more than 7500 chain stores, superstores, military bases, and other institutions, with more than 100,000 products in its basket.
Arun Sundaram, a research analyst from CFRA, while giving his views on the deal, said that a reported $2 billion deal of more than 400 stores will be larger than originally estimated. He also noted that, “The good news is that C&S Wholesale Grocers has the capital and experience to successfully operate these stores, including wholesale and distribution.”
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What it means for C&S?
C&S has made its retail ambitions clear as it goes under a change of leadership. In early August, C&S announced that the COO Eric Winn will succeed Bob Palmer as the new CEO of the company.
Before assuming his role as a COO in late 2021, Winn served as the president of the commercial department, where he led the commercial market to a rapid expansion in new markets and territories.
Some of his renowned deals included, acquiring 12 top friendly super markets in Vermont and New York. In another deal they acquired wisconsin-based 11 Sheboygan corporate run stores in July 2021.
This deal can become a major breakthrough for C&S, as it currently serves as a supplier rather than operating its own grocery stores, which would give it a much bigger footprint.