The owner of the Albertson’s supermarket chain announced Thursday that it is buying Safeway Inc. for $9 billion, combining two of the nation’s biggest grocery businesses. But the combined company won’t be the biggest by a long shot. Combined, they will still be smaller than Kroger, and lumping all three chains together still wouldn’t bring them close to matching the grocery sales at Wal-Mart.
This gives us an idea of why these chains might want to consolidate: as a big global player, Wal-Mart uses its size to squeeze out tons of efficiencies, and it aims to keep growing. The grocery business has been consolidating to compete: Albertson’s and Safeway already operate a bunch of smaller, regional chains that they’ve swallowed over the years: Vons, Tom Thumb, Amigos, Jewel-Osco, Lucky—a total of 15.
The merger will take some time to complete, and in one sense, the deal isn’t completely done—Safeway has three weeks to entertain other offers, and Kroger might be interested (they’d have to pay the current bidders a quarter-billion dollars as a cancellation fee). The Federal Trade Commission will perform a review of the deal to make sure a merger would not create monopolies in some markets; the companies have already said they may have to ditch some stores in some cities to accommodate the FTC.
Assuming they clear all those hurdles, the companies say they expect the deal to actually close late this year. Until then, they say they’ll still be competitors in some cities.
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