Bloomberg reports that “the US Federal Trade Commission and a group of states are poised to sue as soon as next week to block the tie-up between supermarket giants Kroger Co. and Albertsons Cos., according to people familiar with the plans.
“The suit is expected before Feb. 28, when an agreement not to close the deal between the companies and the FTC expires. Several states are expected to join the suit alongside the federal antitrust enforcers, the people said.
“The companies are working to schedule meetings with FTC Chair Lina Khan and the agency’s other commissioners in an effort to persuade the antitrust agency not to sue over their proposed deal, said the one of the people, who asked not to be named discussing confidential matters.”
Both Kroger and Albertsons confirmed continuing meetings with the FTC.
Bloomberg writes that “the FTC and state attorneys general have been preparing a complaint to block the $24.6 billion acquisition amid concerns the merger would lead to lower wages for workers and higher prices for groceries.
“A meeting between the companies and the FTC commissioners — who make the final call on whether to file a case — is the last step before a lawsuit or a settlement is filed, often referred to as a ‘last rites’ meeting.”
The story also points out that “the deal has faced opposition from some labor groups and elected officials, and Kroger has said the companies are committed to fight for the deal in court if needed. In a bid to stave off the antitrust concerns, the companies agreed to divest at least 413 stores to Piggly Wiggly chain owner C&S Wholesale Grocers Inc. — itself a nonunionized employer.”
Two states – Washington and Colorado – already have sued to block the deal on competitive grounds. Indications are that California would be one of the states likely to sign on to an FTC effort to stop the merger.
KC’s View:
I would imagine that any last rites meetings between the retailers and the FTC likely is focusing on how many more stores might have to be divested and sold to C&S in order to get the deal across the finish line. In the early days after the announcement, Kroger indicated that the original plan to divest 413 stores could be increased by about 200 units; it is hard to know if that would be enough to satisfy the FTC.
It has been my belief from the beginning that the odds were pretty good that the FTC would try to block the merger, and that any divestment would probably be at the high end of the proposed number.
There’s no question that the retailers will fight any FTC attempt to block the deal. It all is a matter of how long it will take, how expensive it will get, and the degree to which the individual companies can innovate when their future is in limbo.
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