MEMO: Senate Hearing Today on Proposed Kroger-Albertsons Merger

Nov. 29, 2022

TO: Reporters on Congress, private equity, antitrust
RE: Senate hearing TODAY on proposed Kroger-Albertsons merger

Contacts:
Carter Dougherty, Americans for Financial Reform, carter@ourfinancialsecurity.org
Jonathan Williams, United Food and Commercial Workers Local 400, jwilliams@local400.org

Today, the Senate will hold a hearing on the proposed acquisition of grocery chain Albertsons by Kroger, the nation’s largest standalone grocery retailer. Sens. Amy Klobuchar (D-Minnesota) and Mike Lee (R-Utah), both skeptics of the merger, will preside over the hearing.

The proposed merger has drawn intense opposition from a bipartisan group of elected officials, organized labor, consumer advocates, and antimonopoly groups. They have asked the Federal Trade Commission to reject the proposed combination. 

These are the nation’s two largest standalone grocery chains. They overlap in many markets, including the Washington, D.C. area where Kroger’s Harris Teeter and Albertsons’ Safeway compete, and across large swaths of the West. (Albertson’s other brands, active around the country, include Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s.)

The inevitable result of a monopolistic merger of this magnitude often results in store closures, laid-off workers, surging prices – which already rose at double-digital rates over the last year –, and proliferating food deserts in lower-income and rural areas.

As part of the merger agreement, Albertsons is paying a special $4 billion dividend to its shareholders – 57 times the size of any previously paid dividend – before the sale to Kroger. This payment has been engineered by Cerberus Capital Management, the private equity firm that heads a consortium of shareholders that controls Albertsons and has seats on its board. The company has already extracted $4 billion in dividends from Albertsons without the proposed payment.

If this payment is made, it will wipe out virtually all of Albertsons’ liquid assets and force the company to borrow extra money. Afterward, the company will be left without cash on hand and saddled with a mountain of debt—$4.9 billion owed to worker pension funds and $7.5 billion to creditors.

The case is egregious enough that the Washington state attorney general, Robert Ferguson, persuaded a state judge to bar payment of the dividend pending a further investigation. A separate set of state attorneys general, led by Washington, DC Attorney General Karl Racine, filed a lawsuit in federal court. And the Oregon attorney general’s office has also sought information about the merger. The FTC has already expressed skepticism about private equity-driven tactics of consolidation.