Kroger Company (KR) plans to reduce grocery prices by $1 billion if its anticipated merger with Albertsons Companies (ACI) is approved. Kroger had earlier promised a $500 million price cut at Albertsons stores. In response to the intense scrutiny of the $25 billion merger, the company has decided to double the amount to $1 billion to appease regulators. Shares of both Kroger and Albertsons rose by 1% on the news yesterday.
Albertsons Merger Faces Regulatory Scrutiny
Since the announcement of the proposed merger in 2022, the deal has faced legal scrutiny at multiple levels. Currently, the merger is scheduled for a Colorado court trial on September 30, a Washington state trial on September 16, and a Federal Trade Commission (FTC) administrative trial on August 26.
Regulators have opposed the deal due to concerns about higher grocery prices and reduced wage bargaining power. To address concerns, both companies pledged to raise worker wages by $1 billion, invest $1.3 billion in Albertsons stores, and sell around 600 stores to C&S Wholesale. They also claim the merger will improve their ability to compete with major retailers like Walmart (WMT) and Amazon.com (AMZN).
Yet regulators seem unfazed by the promises and continue to view the deal as a threat to competition.
What Is the Future of Kroger Stock?
Owing to the uncertainty of the merger, Wall Street remains divided on Kroger’s stock trajectory. On TipRanks, KR stock has a Moderate Buy consensus rating based on seven Buys versus five Hold ratings. The average Kroger Company price target of $58.80 implies 11.2% upside potential from current levels, while shares have gained 17.1% year-to-date.
Is ACI a Good Buy?
With one Buy and six Hold ratings, ACI has a Hold consensus rating on TipRanks. Also, the average ACI price target of $23.33 implies nearly 14% upside potential from current levels. Meanwhile, ACI shares have lost 9.4% so far this year.
