According to the news from New York Times, since the announcement of the pending mega-merger between Kroger and Albertsons in October, the country's two largest grocery store chains, the corporations have maintained that the union will benefit consumers, employees, and communities.
Cerberus and a group of investors may be the biggest beneficiaries in the $24.6 billion agreement. These organizations have already made significant profits from their long-term investment in Albertsons and expect to make billions more from the collaboration.
Last Monday, the Washington State Supreme Court declined to hear a petition by the state attorney general that sought to halt a dividend payment to Albertson's stockholders, alleging that it would financially damage the company if the merger failed. The judgment clears the door for Albertsons to pay its stockholders a $4 billion dividend. The buyout group, which controls 73 percent of the organization, will get the maximum share of the dividend, or $3 billion, of which $2.5 billion will be paid in cash, and the other $1.5 billion will be borrowed and placed on Albertsons' balance sheet. Albertsons stated that the company would start paying the special dividend instantly.
The legal challenge to the dividend is the initial step, which is expected to be a lengthy and challenging process for Krogerc and Albertsons. Their strategy to build a behemoth with $200 billion in annual revenue and 5,000 stores all over the country functioning under popular chains such as Safeway, Ralphs, and Vons can also be challenging.
The firms have stated that regulatory approval for the complex transaction will not occur before early next year and might need the sale or spinoff of several supermarket outlets. Washington Analysis, a Washington, D.C.-based research firm specializing in political and regulatory issues, estimates that the merger will be successfully closing at 35%.
When consumers are already suffering from high food prices, consumer activists claim that the merger would eliminate any significant competition in multiple cities and localities, resulting in consumers paying more for products. Union representatives have also slammed the arrangement, claiming that it jeopardizes jobs by forcing the sale of a number of grocery stores around the country.
Even independent grocery store companies are concerned about the collaboration, claiming it will raise food costs and complicate an already challenging competitive landscape. According to Michael Needler Jr., the president and chief executive of Fresh Encounter, a chain of 98 grocery stores based in Findlay, Ohio, “when the large power buyers demand full orders, on time and at the lowest cost, it effectively causes the water-bed effect.” “They push down, and the consumer packaged goods companies have no option but to supply them at their demands, leaving rural stores with higher costs and less availability to products.”
The two grocery store chains and finance companies participating argue that the transaction is not about making money for investors. Kroger said, “Our merger with Albertsons provides meaningful, measurable benefits to America’s consumers, associates of both companies, and the communities we serve,”
Albertsons said in a statement that it had “grown tremendously with the help of our sponsors and other investors.” It stated that it had invested billions of dollars in renovating its stores, developing digital and technology platforms, and improving associate compensation, benefits, and training programs.
Source - New York Times
Author's Detail:
Surabhi Bhaiyya, LinkedIn
Senior Research Analyst at Cognitive Market Research
Surabhi Bhaiyya is an experienced market researcher focused on the Pharma & Healthcare industry. With over 7+ years of experience, She has worked with major pharmaceutical companies and healthcare providers, helping them to understand market trends, identify new business opportunities, and develop effective sales & marketing strategies. Her expertise lies in the ability to analyze complex data sets and deliver insights that drive business decisions. At Cognitive Market Research, she handles the market research related to Pharma and healthcare industry. To get in touch and access the above report book an apointment at https://calendly.com/speak-to-analyst.
Author's Detail:
Surabhi Bhaiyya /
LinkedIn
Senior Research Analyst at Cognitive Market Research
Surabhi Bhaiyya is an experienced market researcher focused on the Pharma & Healthcare industry. With over 7+ years of experience, She has worked with major pharmaceutical companies and healthcare providers, helping them to understand market trends, identify new business opportunities, and develop effective sales & marketing strategies. Her expertise lies in the ability to analyze complex data sets and deliver insights that drive business decisions. At Cognitive Market Research, she handles the market research related to Pharma and healthcare industry.
