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M&A Monday: With the massive $25B merger of Kroger and Albertsons there is a lot to dissect. As the world gets tougher (strong economy is Bullsh!t) to thrive and survive, companies within an industry often consolidate. These long time competitors agreed that to survive these tumultuous and rapidly changing times, and face the competition presented by behemoths Walmart and Amazon, this merger had to happen. For it to get approval from the Feds and to avoid Antitrust Laws as a monopoly, they needed an FTC-approved divestiture buyer with industry experience. And this is what I think is great, enter C&S Wholesale Grocers, who will buy 413 stores, get 3 brands, 5 private label brands, 8 distribution centers, and 2 offices. Why do I think that is great? 1. It keeps all the stores open, and frontline employees their jobs. 2. I like to root for long standing businesses that are the underdog or that may not be well known. C&S has been around since 1918 as a supplier to independent grocery stores. Albeit not a true underdog as they are the 8th largest privately owned company in the US, they are an underdog compared to Walmart and Amazon, Kroger and Albertsons. ( As a country and society, we DO NOT want our choices to be dictated only by Walmart an Amazon. ) This acquisition gets C&S vertical growth, more distribution, name recognition, and are now will be a decent sized IPO if they wanted to go that route. Sales Pitch: This story is not only relevant to consumers, the aspects are great examples for entrepreneurs and management teams of small businesses to mid sized companies, the target market for us at Stony Hill Advisors. Times are tough, will get tougher, and businesses need to survive. At the same time, there is opportunity abound, and a chance to thrive during these times. A smart C-suite will use this time to GROW. Add in that we are in the last third - tail end of the Baby Boomer Wealth Transfer, this is the time to be a BUYER. Businesses need to think like an investor, and have an active M&A mandate. How do you move forward? This is what we do, and how we can help. Our Business Consulting Team, The Stony Hill Group, can help you build up internally and externally to move forward. Consult, evaluate, appraise and figure out the strategic plan. Develop a consolidation plan, or one of divestiture, even turnaround if need be. We can add fractional C-suite officers to your management team, with a mandate to acquire and integrate and be your in-house acquisition team, working closely with our M&A Advisors. We can be your Buy-side M&A Advisors. Or we can help the other way and help you sell, or IPO. Even better, grow by acquisition and then do an IPO to EXIT. And we are real. Reach out and we will get you in the queue. Roy Y. Salisbury Geoff Miller Kevin Cook Dave Severance Scott Rother John Andrews Joseph Radic Robert Lilley Christopher "Duffy" Fron, MBA Bruce F. Taub Dan Flaherty Dan Lavelle, CPA Patrick A. Howell Paul Knopick Corey McClintock

It's not surprising that merger partners Kroger-Albertsons have upped the number of stores to be divested under their $1.9 billion deal with C&S Wholesale Grocers announced back in September. Under the initial agreement, Kroger-Albertsons planned to sell 413 stores, eight distribution centers and two offices in 17 states and the D.C. to C&S. Kroger-Albertsons also reported at the time that C&S could be required to buy up to another 237 stores “in certain geographies” based on securing Federal Trade Commission and other regulatory clearance for their mega-merger. Apparently, the latter provision has come to pass under the pending FTC review. What remains to be seen is whether the expanded divestiture will be enough for the merger to get the regulatory green light. The updated transaction adds another 166 stores — including the Haggen store banner in Washington state — and $1 billion to the C&S purchase (now totaling $2.9 billion), which also now extends to locations in 18 states and D.C. (with the addition of Delaware). Also under the amended deal, C&S will license Albertsons Cos.' Albertsons banner in California and Wyoming and its Safeway banner in Arizona and Colorado. The initial plan for C&S to buy Kroger’s QFC banner in the Pacific Northwest, upscale Mariano’s brand in Illinois and Albertsons’ Carrs stores in Alaska is being upheld. The number of Kroger-Albertsons stores slated to be acquired by C&S in each state also has been tweaked, with some counts increased and others decreased. Here's the new breakdown as per Kroger: WA: 124 Albertsons Cos. and Kroger stores CA: 63 Albertsons Cos. stores CO: 91 Albertsons Cos. stores OR: 62 Albertsons Cos. and Kroger stores TX/LA: 30 Albertsons Cos. stores AZ: 101 Albertsons Cos. stores NV: 16 Albertsons Cos. stores IL: 35 Albertsons Cos. and Kroger stores AK: 18 Albertsons Cos. stores ID: 10 Albertsons Cos. stores NM: 9 Albertsons Cos. stores MT/UT/WY: 11 Albertsons Cos. stores DC/MD/VA/DE: 9 Harris Teeter stores In announcing the updated deal on April 22, Kroger also stated the following: "Kroger and Albertsons Cos. remain committed to defending the merger in court and unlocking the many benefits it offers." Back in February, the FTC had filed suit to block the Kroger-Albertsons merger, claiming that the combination of the nation's two largest conventional supermarket operators was anticompetitive and the C&S divestiture deal didn't provide an adequate antitrust remedy.

Is Retail Grocery Heading Toward a Final Showdown? The Kroger-Albertsons merger is estimated to have a 75% chance of being completed, as reported by WCPO 9. In light of this, “the secretaries of states from Colorado, Arizona, Maine, Minnesota, New Mexico, Rhode Island, and Vermont wrote Federal Trade Commission Chair Lina Khan asking the agency to stop the merger,” according to Supermarket News. This continued disapproval of the merger comes even after U.S. District Judge Vince Chhabria in San Francisco dismissed an antitrust consumer lawsuit that challenged the $25 billion bid by Kroger to acquire Albertsons, as reported by Reuters. ⚡BrainTrust Commentary: Dave Wendland: “To be successful in attracting shoppers and earning their loyalty, grocers need to rethink their assortment, their retail footprint, and their overall experience.” DeAnn Campbell: “The root cause of the current wave of grocery mergers is debt, so I would argue that the coming landscape changes were inevitable. “ Lisa Goller, MBA: “Popular chains like H-E-B and Publix prove there’s enough room for many grocers to win.” In regards to US grocery consolidation, Neil Saunders had a counterpoint from a global perspective: "The US grocery market is one of the least consolidated in the mature retail world. The top five players account for 30.8% of food market share. In the UK this figure is 57.6%, in France it’s 43.1%, in Australia it’s a whopping 68.2%." Your thoughts? Comment below! Full Article: https://lnkd.in/dKq9dkmP

It's not surprising that the FTC and some states have moved to block the Kroger-Albertsons merger. From the start, the odds were against a transaction of that size gaining swift approval. However, it appears the FTC and suing states continue to misread the grocery retail market. They appear focused only on competition among conventional supermarkets, which have been steadily losing market share over decades to mass merchants like Walmart and Target, warehouse clubs like Costco, Amazon and other online retailers, and fast-growing chains such as deep-discount, limited-assortment grocers like Aldi plus dollar stores like Dollar General and Dollar Tree/Family Dollar. Rising price competition with those operators was a chief reason behind Kroger's and Albertsons' decisions to merge. By overlooking the growing market power of such mass chains, the FTC could end up doing a disservice to consumers by blocking the merger. As Kroger stated in its announcement on the FTC's move: "The FTC's decision makes it more likely that America's consumers will see higher food prices and fewer grocery stores at a time when communities across the country are already facing high inflation and food deserts. In fact, this decision only strengthens larger, non-unionized retailers like Walmart, Costco and Amazon by allowing them to further increase their overwhelming and growing dominance of the grocery industry." Despite comments to the Associated Press by Jon Donenberg, deputy director of the Biden administration's National Economic Council, Kroger and Albertsons are certainly facing more than "healthy competition" in the grocery retail arena, also including drugstore and convenience store chains. "When large corporations are not checked by healthy competition, they too often do not pass cost savings on to consumers and exploit their workers," Donenberg told AP. But the fact is, it has become increasingly harder for traditional supermarkets to compete on price, and with the sharp focus on value by today's shoppers, the format remains under serious threat from mass chains and online retailers. "We are disappointed that the FTC continues to use the same outdated view of the U.S. grocery industry it used 20 years ago," Albertsons said in a statement to AP.

IS THE KROGER ALBERTSONS MERGER THE BEST OPTION FOR CONSUMERS? I encourage everyone interested in this topic to watch this video of Scott Moses talking about the Kroger Albertsons merger. Scott is arguably the most knowledgeable expert on the grocery industry. https://lnkd.in/gs-8BHVP Scott provides a lot of information in the video about C&S Wholesale Grocers, Kroger, Albertsons, and why the merger should be approved. Scott represents C&S and Albertsons. I disagree with Scott about the following: 1. To get the merger with Albertsons approved, C&S is purchasing 579 stores but it could be as many as 700, to appease the concerns of the Federal Trade Commission. Kroger claims that C&S will be a "fierce competitor." This is false. Kroger specifically selected C&S because they're not a competitor. C&S and Kroger have an arrangement whereby C&S has agreed to help Kroger. C&S is Kroger’s pawn. Kroger is using C&S to play chess to get the merger approved. See Comments. 2. It would be much better for consumers, food companies and CPG companies, if Ahold Delhaize acquired Albertsons. Why? Because it would provide a legitimate competitor to Kroger. What's being lost in the discussion is that Kroger, already the largest stand-alone grocer, will become even larger and wield more power over their suppliers and brands. If Scott truly wants what's best for the industry and consumers, he would make the argument that the courts should side with the FTC and block the merger so Ahold Delhaize can acquire Albertsons. 3. Scott makes the argument that the merger is needed to protect and grow Union jobs. Seriously? A merger should be approved because it protects Union jobs? Shareholders of Albertsons and Kroger should be outraged. Union labor costs more than non-union labor. Union contracts reduce the ability of Union grocery retailers to introduce strategies and technology to reduce costs and complexity, when compared to non-Union retailers that sell groceries. Fact. I agree 100% with Scott that the FTC and members of the Courts have failed to understand how much the grocery industry has changed. Groceries are strategic hence the reason why Walmart, Costco Wholesale, convenience stores, Amazon, CVS Pharmacy, and even some restaurant chains, are selling groceries. Traditional grocers are facing increased competition. I understand the reasons for the merger. However, this is the greatest story ever sold. The hyperbole is off the charts. Kroger has gone on offense using paid spokespersons to make claims that consumers will benefit from lower prices. Is that true? Will Kroger Albertsons become a low price leader? Not likely. Shareholders and analysts should ask this question: Who will be the CEO of a combined Kroger Albertsons? Rodney again? My recommendation is Tim Steiner, CEO of the Ocado Group. David Guggina, Chris Nicholas, Kathryn McLay and Jason Hart, to name a few, also have my vote of confidence. #retail John Mayo https://lnkd.in/gRHZyi2a

Can't exactly say I had C&S on my 'Kroger/Albertsons Merger Bingo Board' This all cash deal will strengthen banners like Smiths, King Supers, Ralphs and Safeway in some regions, while making C&S a strong #2 in those markets. While this does satisfy the divestiture requirement, there are a few interesting or concerning pieces: 1) Re-bannering stores has not historically been a successful endeavor (Haggen 2.0?) 2) C&S will be able to license the Albertsons brand in 4 states. A little reminiscent of SuperValu & Albertsons LLC from years back.. 3) No Save Mart?? I for sure thought they would have been a big player looking to swoop up market share... Bottom-line is: no one knows what the hell is going on! https://lnkd.in/g2_2wPCE

Important Op-Ed by Daniel Seiden in the The Arizona Republic | azcentral.com | La Voz yesterday discussing the competitiveness of the grocery industry, especially in Arizona, and the importance of the Kroger-Albertsons merger. "No longer limited to traditional grocery stores, concepts like supercenters, membership clubs and online grocers have entered the field to compete for a spot in consumers’ household budgets.” Mr. Seiden is correct, “Walmart has a bigger market share than even a combined Kroger and Albertsons would.” In fact, according to Walmart’s 2023 Annual Report, its 83 Supercenters in the state of Arizona displace $5.2 BILLION IN COMPARABLE SUPERMARKET SALES IN ARIZONA ANNUALLY. Mr. Seiden is also correct, “Amazon, Costco Wholesale, Target, and ALDI USA have all grown their offerings in Arizona as well.” In our opinion, ALDI’S NEW DISTRIBUTION CENTER IN GOODYEAR, AZ, will result in the company site-saturating the state, and soon there will be as many, if not many more, Aldi stores in Arizona as there are total Walmart stores (125) today. Link: https://lnkd.in/ef-x_DQk #krogeralbertsonsmerger #krogeralbertsons

A year ago, Kroger and Albertsons announced the groundbreaking news that the two companies were entering into a definitive agreement to merge, leading to widespread speculation about the fate of stores to be spun off or divested, whether the deal would gain federal approval, and ultimately what the impact would be on the millions of Americans who regularly shop at these stores. Last month, we gained some clarity as it was revealed that C&S Wholesale Grocers agreed to acquire 413 stores for $1.9 billion in connection with the proposed merger. In this two-part blog series, we take a closer look at what this means for the companies involved, other supermarket competitors, and for U.S. grocery shoppers. #groceryretail #mergersandacquisitions #mcmillandoolittle

It’s very telling to me when politicians enter the fray in to areas they know very little about. The grocery industry changed an awful lot in the 70 years my family was in it and people’s shopping habits have also changed tremendously. While this deal may have concerned me decades ago, it doesn’t concern me at all in 2023. Walmart, Amazon, Target, dollar stores, pharmacies, and other non-traditional grocers are now big players in this arena. This move by Kroger/Fry's Food and Drug & Albertsons strengthens the traditional grocer at a time when the market is increasingly competitive with new players. This merger strengthens the position for workers and the consumers by ensuring these current competitors are able to compete against the new kids on the block, so to speak. It’s time to jump in to the Time Machine and join us in 2023. Saying No to this merger only strengthens Amazon and Walmart.