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Kroger will get about $1.9 billion in cash for the store
divestitures. The company said it may need C&S to purchase up to
an additional 237 stores in certain geographies to get
regulatory nod for the deal, which is on track for an early 2024
close.
"One of the main bearish arguments we heard on Kroger and
Albertsons is that the companies likely were having trouble
finding a buyer... Now this major hurdle is in the past,"
J.P.Morgan analyst Ken Goldman said.
Kroger's shares surged as much as 6%, even as it took a
$1.4-billion charge in the second quarter related to an opioid
case settlement, and warned of weaker sales for the rest of the
year. Albertsons' stock was up 3%.
The proposed merger of the supermarket operators has faced tough
scrutiny from consumer groups and U.S. lawmakers since its
announcement last October, over concerns it would reduce
competition and drive grocery prices up.
SoftBank-backed C&S operates primarily as a supplier rather than
a grocery-store operator. It currently has around two dozen
stores under the Grand Union and Piggly Wiggly brands.
"(C&S) brings experience with the merger process, having been an
FTC-approved divestiture buyer in prior grocery transactions,"
CEO Rodney McMullen said on a post-earnings call.
Separately, Cincinnati, Ohio-based Kroger said it expects the
spending environment to "remain challenged" due to still-high
inflation.
It missed Wall Street expectations for same-store sales in the
second quarter ended Aug. 12, and forecast identical sales,
without fuel, to be at the low end of its annual target.
The company also swung to a loss of $180 million in the quarter,
compared to a profit of $731 million from a year ago, accounting
for the charges related to the opioid settlement.
However, on an adjusted basis, it reported a profit of 96 cents
per share, compared to LSEG estimates of 91 cents per share.
(Reporting by Juveria Tabassum and Savyata Mishra; Editing by
Pooja Desai)
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