Kroger and Albertsons Expand Divestiture Plan in Bid to Save Merger

The Kroger Company and Albertsons Companies announced on Monday that they have amended their agreement with C&S Wholesale Grocers for the sale of stores and other assets, as the grocery chains seek to overcome regulatory hurdles to their proposed $24.6 billion merger.

Albertson’s operates Vons; there are two Vons locations in Pasadena, one at 155 California and the second location is at 2355 E Colorado Blvd.

Kroger operates three Ralphs stores, at 320 W Colorado Blvd, 160 N Lake Ave., and 3601 E Foothill Blvd., and Food4Less at 1329 N Lake Ave.

It is not known which — if any — of these Pasadena stores may be sold to C&S Wholesale Grocers, and if sold, what plans C&S has in store for them.

The updated divestiture package, which expands on a plan originally unveiled in September, will see Kroger sell 579 stores across several states to C&S, an increase of 166 stores from the 413 in the initial agreement.

The deal also includes increased distribution capacity through different and larger facilities, expanded transition services agreements, the addition of one dairy facility, and the transfer of specific private-label brands such as Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals, and Waterfront Bistro to C&S, as well as providing access to the Signature and O Organics brands. Kroger said the stores will continue operating as they do today under the new owner.

“We have reached an agreement with C&S for an updated divestiture package that maintains Kroger’s commitments to customers, associates and communities, addresses concerns raised by regulators, and will further ensure that C&S can successfully operate the divested stores as they are operated today,” said Rodney McMullen, Kroger’s chairman and chief executive.

The amended plan comes as Kroger and Albertsons face legal challenges from federal and state regulators who argue the merger would harm competition. The companies said they believe the enhanced divestiture package will bolster their position in the pending court proceedings.

Under the new agreement, Kroger will sell several regional grocery banners to C&S, including QFC, Mariano’s, Carrs, and Haggen. Stores currently under these banners that are retained by Kroger will be re-bannered into one of the retained Kroger or Albertsons Cos. banners following the close of the transaction with C&S. Under the amended agreement, C&S will license the Albertsons banner in California and Wyoming and the Safeway banner in Arizona and Colorado.

The number of stores contained in the divestiture plan by geography is as follows: 124 Albertsons Cos. and Kroger stores in Washington, 63 Albertsons Cos. stores in California, 91 Albertsons Cos. stores in Colorado, 62 Albertsons Cos. and Kroger stores in Oregon, 30 Albertsons Cos. stores in Texas and Louisiana, 101 Albertsons Cos. stores in Arizona, 16 Albertsons Cos. stores in Nevada, 35 Albertsons Cos. and Kroger stores in Illinois, 18 Albertsons Cos. stores in Alaska, 10 Albertsons Cos. stores in Idaho, 9 Albertsons Cos. stores in New Mexico, 11 Albertsons Cos. stores in Montana, Utah, and Wyoming, and 9 Harris Teeter stores in Washington D.C., Maryland, Virginia, and Delaware.

Eric Winn, chief executive of C&S Wholesale Grocers, said the company was confident the expanded store package and supporting assets would allow it to successfully serve the communities where the divested stores operate. “C&S is a leader in the grocery industry, and we are excited for this expansion of our current retail business, which is a key part of our long-term growth strategy,” Mr. Winn said.

Kroger and Albertsons said the amended plan would extend a viable competitor to new markets, ensure that no stores close as a result of the merger, maintain existing union contracts and benefits, and commit to investing in employees and stores for the long term. The companies have pledged to lower prices, increase local product assortments and invest in employee wages if the merger is approved.

The proposed merger has faced stiff opposition from unions, consumer groups and elected officials who warn it could lead to higher grocery prices and diminished competition in an already consolidated industry. Kroger is the largest supermarket operator in the United States, and Albertsons is the second-largest.

Kroger and Albertsons said they remained committed to defending the deal in court. The companies argue the merger will benefit shoppers by unlocking $500 million in price reductions and $1.3 billion in store improvements. They have also pledged to invest $1 billion in employee wages and benefits.

Subject to customary closing conditions and regulatory approval, C&S Wholesale Grocers will pay Kroger approximately $2.9 billion in cash for the stores and other assets included in the divestiture plan. The sale is contingent on the successful completion of the Kroger-Albertsons merger.