Shares of Albertsons Companies (NYSE:ACI) Inc. saw a decline of over 4% following a U.S. District Judge's decision to block its proposed $25 billion merger with The Kroger Co (NYSE:KR). The ruling came as a victory for the U.S. Federal Trade Commission (FTC) and the Biden administration, which opposed the merger on the grounds that it would reduce competition and potentially raise prices for consumers.
The FTC, during a trial in Portland, Oregon, argued that combining the nation's top two traditional grocery chains would lead to higher prices and lesser bargaining power for unionized workers. Conversely, Kroger's stock experienced a 4.3% increase.
Kroger defended the merger, claiming it would lower prices, especially at Albertsons, where it alleges prices are significantly higher than at Kroger stores. Kroger anticipated that the merger would enable cost savings from a larger operation and a broader customer base, enhancing revenue for its data consulting business.
The ruling by Judge Adrienne Nelson effectively terminates the merger, as acknowledged by Kroger in court documents. The merger would have resulted in Kroger owning about 5,000 stores nationwide. Both companies had argued that the merger was necessary to effectively compete with global entities like Walmart (NYSE:WMT) and Amazon.com (NASDAQ:AMZN).
To address competition concerns, Kroger and Albertsons proposed divesting 579 stores, particularly in western states where the two chains operate in close proximity. However, this concession failed to sway the judge.
The proposed merger faced opposition from grocery workers' unions, which expressed concerns over potential job losses. Additionally, attorneys general from 10 states and the District of Columbia either supported the FTC's lawsuit or filed their own legal challenges to block the merger.
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