Judge Blocks Kroger-Albertsons Mega-Merger | Hacker News Reader

Judge Blocks Kroger-Albertsons Mega-Merger

thebignewsletter.com

31 pointstoomuchtodo15 comments

Albertsons/Safeway was purchased by private equity [0]. They used the terms of the merger to 'cash out' - my understanding was the PE firm has already drained Albertsons' cash reserve.

Checking on the twitter, apparently they're using what cash Albertsons has left to do a share buyback, and are going to sue Kroger [1] for sabotaging the merger by not addressing the regulators' concerns.

[0] https://www.bloomberg.com/news/articles/2022-10-19/cerberus-...

[1] https://www.albertsonscompanies.com/newsroom/press-releases/...

It's heartwarming to see private equity plans fail like this.

How is the nation's biggest grocery store being identified as a PE target ?

It isn't a growth business. It isn't underperming expectations. It doesn't have expansion opportunities. Brick and mortar is already struggling and behemoths like Amazon and Walmart are in a leading position in online sales.

It's a head scratching decision. I would love to be a fly on the wall when such proposals are made.

Because it's trivial to take an existing healthy business and extract value from it? Literally cannibalizing a business is a way to make money. The group that killed Sears for example knew what they were doing, and got very wealthy doing it.

As long as there is a nonzero switching cost for any business relationship, it is profitable to take over that business and milk that switching cost for pure profit. Switching costs go up non-linearly as your market approaches monopoly or duopoly.

They've both been owned by BHN for a long time, which was acquired by Silverlake Holdings.

This is great news! I live near Kroger HQ and have been following the case closely Both of these companies are in the S&P 500 and have plenty of negation power with suppliers without merging. Both are profitable companies. This was not a win for consumers and I am not convinced it was even a win for the companies themselves as it required them to give up ~10% of their stores.

Do you know their combined market share?

Kroger is 7.3% & Albertsons is 4.5% according to GlobalData. Varies a little by source but that is approx correct.

But that misses the consumer picture, grocery is very regional and in many markets these two are 100% of offerings, hence why the deal required them to sell a bunch of stores.

It's good in the sense that a merged Kroger-Albertsons won't be able to use greater retail dominance to push suppliers into offering them special deals. On the other hand, simple enforcement of the Robinson-Patman Act, which stopped in the 1980s[1], would go a long way to reversing the power conglomerated grocery chains have in price discrimination.

1. One guess to pick the administration :/

Looks like Albertsons has officially pulled out (and is suing Kroger)

https://apnews.com/article/kroger-albertsons-79e366723d7287b...

I wish they could've blocked the merger of Aldi and Winn-Dixie...

I forgot about that one. Was there any scrutiny on the deal? It seemed to fly under the radar like nobody cared.

Kroger, Albertsons, and about 2 dozen other grocers are all owned by Blackhawk Network and Silverlake. They also sell the most gift cards in US.

Great work blocking 2 mid players in the crappy low margin grocery business who have a combined 12% market share.

Walmart, Costco, and Amazon couldn't be happier.

I just don’t get the argument that they need to compete with those other stores. I have a Safeway (Albertsons) and Fry’s (Kroger) less than a mile from my house. I go to these for my general grocery shopping along with a few smaller specialty grocery stores. I have a Walmart just over a mile from my house and sure I’ll buy groceries there but usually because I am already needing a hardlines product from Walmart. Costco is by far the biggest clusterfuck of them all and I’ll only step foot in there if I’m buying bulk items or want something that only Costco sells. Why can’t they all have their niche?

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