Proposed Kroger-Albertsons Merger
Landmark Merger to Offer Mixed Results for Shopping Center Owners
Agreement's disposition requirements to have major impact. The proposed union of Kroger and Albertsons, the nation's top pure play supermarket organizations, will have significant implications for the retail sector, if approved. By assembling nearly 5,000 stores under the Kroger umbrella, the agreement will alter grocer competition and create numerous possible scenarios for owners of shopping centers with a tenant subject to the merger. If the Federal Trade Commission (FTC) were to approve of the deal, the two grocery chains will be required to divest 100 to 650 stores, with disposal of these assets achieved in a variety of ways. It is this potential divestiture that poses the most risk for shopping center owners. The most straightforward strategy appears to be the bulk sale of stores to expanding regional grocers. However, Albertsons' acquisition of Safeway in 2014 — and the subsequent sale of nearly 150 stores to then regional grocer Haggen — serves as a cautionary tale. Additionally, a bulk sale to another party may prove difficult as Albertsons’ family of stores are unionized, making them less attractive to potential bidders.