Title: Kroger and Albertsons Expand Divestiture Plan with C&S, Now Valued at $2.9 Billion

In an effort to move forward with their merger plan, Kroger and Albertsons have announced the expansion of their divestiture plan with C&S Wholesale Grocers. The grocery chains have increased the number of stores they plan to divest by over a third, bringing the total to 579 stores. The all-cash deal is now valued at $2.9 billion.

The revised divestiture agreement includes additional non-store assets such as infrastructure and access to the Signature and O Organics private brands. C&S will also acquire Albertsons' Haggen banner, in addition to the three other banners it was already set to purchase. This expansion comes as Kroger and Albertsons face opposition from the Federal Trade Commission (FTC), which is trying to impose a preliminary injunction to stop the merger.

By increasing the number of divested stores and non-store assets, Kroger and Albertsons aim to address concerns raised by state and federal antitrust regulators about the original deal. The FTC argued that the merger would weaken competition, leading to higher grocery prices, lower quality products and services, and harm the interests of grocery workers. The agency also criticized the original divestiture plan to C&S, claiming that it would be challenging for C&S to transform the "hodgepodge" of stores into a successful business.

Kroger and Albertsons maintain their stance that the merger will result in lower grocery prices, more choices for consumers, and support for unionized grocery jobs. They view C&S as a well-established buyer for the divested assets, highlighting the wholesaler's financial strength and its entry into new markets.

The updated divestiture plan includes revisions to the targeted geographic areas and adds Harris Teeter stores in Delaware, expanding C&S's presence to its 17th state if the deal goes through. Kroger and Albertsons have also made changes to the number of divested stores in 18 states and Washington, D.C., including significant increases such as 77 more stores in Arizona, 39 more stores in Colorado, and 20 more stores in Washington state.

Under the amended agreement, C&S would license the Albertsons brand in California and Wyoming and the Safeway brand in Arizona and Colorado. Kroger plans to re-brand the stores it intends to retain currently operating under those banners. Additionally, C&S would acquire the Haggen banner, which has 15 stores in Washington and over 2,000 employees, along with the QFC, Mariano's, and Carrs banners.

Kroger and Albertsons assure that all fuel centers and pharmacies associated with the divested stores will continue to operate. The updated divestiture plan also includes expanded corporate and office infrastructure for C&S, increased distribution capacity, and one additional dairy facility.

Furthermore, C&S will gain access to the Signature and O Organics brands, in addition to the previously agreed divestiture of the Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals, and Waterfront Bistro brands.

Following the FTC's concerns about the original divestiture deal, analysts suggest that Kroger and Albertsons should provide a more detailed plan on how they would support C&S, particularly considering its limited experience in running retail stores. The merger's success hinges on Kroger and Albertsons demonstrating their ability to assist C&S in managing a store fleet that is more than triple its current count.

As the battle against the FTC continues, Kroger, Albertsons, and C&S believe that the expanded divestiture plan offers a stronger package of stores and non-store assets, enabling C&S to operate competitively. The grocery chains hope that these updates will alleviate antitrust regulators' concerns and allow the merger to proceed, promising continued service to the communities for years to come.