business news in context, analysis with attitude

Reuters reports that Kroger and Albertsons have begun the process of determining how many stores they will have to divest in order to gain the approbation of the Federal Trade Commission (FTC) and permission to proceed with their $24.6 billion merger.

The story notes that stores in all of the regions in which the two companies operate are being discussed, and that prospective buyers include competing chains.  If a buyer cannot be found, the two companies have said that they would spin them off into a new company owned by Albertsons shareholders.

While the initial plan has been to sell between 250 and 300 stores, it has been conceded that the number could be as high as 650.  A sale could bring in more than $1 billion, Reuters writes.

KC's View:

Maybe it is my memory of the Albertsons-Haggen fiasco that makes me skeptical, but I am just not persuaded that if there is a spinoff company - made up of the stores that a Kroger-Albertsons combo doesn't want - that it will have much chance of success.  A piecemeal sale of select assets to either competing chains or financial entities seems more likely, but I'm not even sure that this will ensure the success of these orphan stores.

I'd also be curious about how an agreement with regulators would be structured.  For example, Kroger has said it wants to move into the northeastern US with its pure-play e-grocery model, mimicking what it has done in Florida.  If the combined company decided to sell off its Shaw's division, would it then be prohibited from coming back into the region as an e-grocery purveyor?  Or would this is a loophole through which it could drive a large grocery delivery truck?