Kroger, Albertsons selling QFC brand name, over 400 stores in $1.9B deal

Kroger and Albertsons will sell more than 400 stores and other assets for about $1.9 billion, seeking to clear a path for a merger with antitrust regulators reviewing a deal that would unify two of the nation’s largest grocery chains.

The 413 stores, along with QFC, Mariano’s and Carrs brand names, are being sold to to C&S Wholesale Grocers. Kroger will also divest the Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro private label brands. In addition, C&S will get eight distribution centers and two offices.

All fuel centers and pharmacies associated with the divested stores will remain with the stores and continue to operate.

In the state of Washington, Kroger operates 55 QFC stores and 61 Fred Meyer locations. Albertsons operates 184 Safeway locations, 16 stores with the Albertsons name and 15 Haggen locations in the state.

“Our priority is protecting competition, consumers, and workers in Washington. We will be reviewing through that lens,” Washington Attorney General Bob Ferguson said in a prepared statement to KIRO Newsradio Friday.

Ferguson sued Albertsons last year in an effort to stop the grocery chain from paying a nearly $4 billion dividend to its shareholders. Earlier this year, The state Supreme Court declined to review the case, clearing the way for the dividend to be paid out.

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Despite the setback, Ferguson noted the merger can be held up by both federal and state regulators.

“This merger is far from a done deal,” Ferguson said at the time. “My team and I will be conducting a thorough review.”

A coalition of United Food & Commercial Workers local unions in 14 states and Washington, D.C., representing more than 100,000 Kroger and Albertsons workers released a statement Friday regarding the announcement, saying this transaction doesn’t ease member fears, it raises them.

“We have raised alarms about the proposed Kroger/Albertsons merger from the very beginning— from threats of store closures, higher prices and reduced competition, the harm to unionized workers’ ability to negotiate strong contracts, as well as the negative ripple effects lower union density would have on workers throughout the grocery industry,” the statement reads. “News of a possible deal with C&S to buy hundreds of stores as part of the proposed merger in no way reduces those alarms. Indeed, in many respects this announcement raises the level of concern for our members.”

Last year, U.S. Democratic Rep. Pramila Jayapal, who represents Washington’s 7th congressional district which includes most of Seattle, called for a Federal Trade Commission (FTC) investigation into the acquisition last year.

She said the merger wouldn’t be good for the average American.

“The acquisition would threaten competition and hurt consumers, workers, and small businesses. It presents several anti-competitive concerns, including fewer product choices and higher costs,” Jayapal said in a statement.

The lawmaker added it raises “anti-competitive” concerns and wants the FTC to investigate before the acquisition is complete.

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Kroger and Albertsons agreed to merge in October. Kroger, based in Cincinnati, Ohio, bid $20 billion for Albertsons. Kroger would also assume $4.7 billion of Albertsons’ debt. The deal is targeted to close early next year.

The grocery chains say they must merge to compete with Walmart, Amazon and other major companies that have stepped into the grocery business. And there is significant consolidation throughout the grocery sector as companies fight with rising prices for everything from food to workers.

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Last month, discount grocer Aldi said it plans to buy 400 Winn-Dixie and Harveys supermarkets in the southern U.S.

Before the deal with C&S closes, Kroger may, in connection with securing Federal Trade Commission and other governmental clearance, require C&S to buy up to an additional 237 stores in certain regions. If more stores are added to the agreement, C&S will pay Kroger an additional as-yet-to-be-determined financial amount.

C&S, which was founded in 1918, is a supplier to independent grocery stores, supplying more than 7,500 independent supermarkets, retail chain stores and military bases. It currently runs Grand Union grocery stores and Piggly Wiggly franchise and corporate-owned stores in the Midwest and Carolinas.

C&S has prior experience with divestitures related to mergers and has successfully transitioned union employees and their associated collective bargaining agreements in the past.

“Importantly in our agreement, C&S commits to honoring all collective bargaining agreements which include industry-leading benefits, retaining frontline associates and further investing for growth,” Kroger Chairman and CEO Rodney McMullen said in a statement on Friday.

Shares of Kroger Co., based in Ohio, rose 5% Thursday and Albertsons Cos., based in Idaho, rose 3%.

Contributing: Steve Coogan, L.B. Gilbert; The Associated Press