In a move that one analyst said is “part of the natural flow of retail’s never-ending evolutionary process,” Kroger and Albertsons are nearing a deal they hope will secure US regulatory clearance for their proposed $24.5 billion merger by selling more than 400 grocery stores to C&S Wholesale Grocers.
The price tag is nearly $2 billion, according to people familiar with the matter, as reported by Reuters.
The deal would give privately held C&S, primarily a supplier rather than an operator of grocery stores, a much more significant footprint, Reuters said.
C&S currently operates about two dozen stores under the Grand Union and Piggly Wiggly brands.
Mark Sigal, CEO of Datex Property Solutions, tells GlobeSt.com that any time that you see consolidation between the largest players in a market, as is the case with Kroger-Albertsons, there are obvious questions about what the impact will be in terms of store closures in geographic areas with overlapping stores and consumer pricing hikes, owing to less competition in the market.
That noted, Sigal said grocery is already one of the most competitive segments, with strong expanding multinational operators, such as Aldi and Ahold, and ever-growing encroachment into groceries by non-pure play operators, such as Walmart, Amazon, Costco, and Target.
He said the move by C&S Wholesale Grocers, historically more of a supplier than operator, to acquire these stores and grow their grocery footprint, is emblematic of this larger trend.
“Specific to retail in general, the grocery segment is consistently one of the top performing categories in terms of sales per square foot and occupancy costs, and groceries are the favored anchor tenant of most open-air retail shopping centers, a trend I don’t see changing any time soon,” Sigal said.
“The retail real estate vertical is very strong, with low vacancies, strong rent collection trends and growing rents, nationwide, meaning that in the aggregate, this move is neither worrisome for the durability of retail nor for consumer protection.”
The stores that Kroger and Albertsons plan to shed are primarily in the Pacific Northwest and the Mountain states, along with some in California, Texas, Illinois, and the East Coast, the sources told Reuters.
SoftBank Group Corp is in talks with C&S about helping finance a small portion of the deal, one of the sources said.