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Kroger, Albertsons launch divest of grocery stores in aim for antitrust clearance, sources say

Kroger [NYSE:KR] and Albertsons [NYSE:ACI] have kicked off the sale of a portion of the combined grocery stores to secure antitrust clearance for their proposed USD 24.6bn merger, three sources familiar with the situation said.

Earlier this month, Reuters reported that the companies are working on plans to sell between 250 and 300 of their combined 4,996 stores to address the concerns from regulators around grocery price hikes. The valuation for the divested stores could top USD 1bn, the same report said.

Each of the sources said that multiple parties are likely to acquire the over 300 stores, which are spread across the US where the retailers operate and are expected to be divested.

The sellers have signed up suitors to participate in the process with financial information being sent to the participants, these sources said.

Citi, which is advising Kroger on the merger, is also advising on the divestment of the stores, the same sources said.

Strategics, including financial sponsor-backed strategics, are likely to dominate the sale process, two of the sources said. Financing should not necessarily be an issue for stable businesses such as grocery stores, they noted.

Initial bids are expected to be collected next month, each of the sources said.

Last October, while announcing the deal, Boise, Idaho-based Albertsons also announced plans to establish a subsidiary, SpinCo, which will be spun off as a standalone public company prior to the merger’s closing and could control between 100 and 375 divested stores from both companies.

The merger between Cincinnati, Ohio-based grocery chain Kroger and Albertsons is expected to close in early 2024, subject to the receipt of required regulatory clearance and other customary closing conditions.

Citi and Wells Fargo are serving as financial advisors and Weil, Gotshal & Manges and Arnold & Porter Kaye Scholer is Kroger's legal advisor. Goldman Sachs and Credit Suisse are serving as financial advisors and Jenner & Block is serving as legal counsel to Albertsons, with White & Case and Debevoise & Plimpton as its antitrust law firms. 

Albertsons and Citi declined to comment. Kroger did not respond to requests for comment.