Kroger, Albertsons Unveil Updated $2.9B Divestiture Plan – What is a Ground Lease?

In response to concerns raised by federal and state antitrust regulators, The Kroger Co. and Albertsons Cos. Inc. have amended their defin itive agreement with C&S Wholesale Grocers LLC for the sale of assets in connection with their proposed merger.

Last fall, Sterling Organization acquired Marketplace at Buckhead, an Atlanta shopping center anchored by a Kroger grocery store. Image courtesy of Sterling Organization

The merger was first announced in October 2022, and the in itial divestiture package (which this amended package modifies) was announced in September 2023.

Subject to customary closing conditions, including Federal Trade Commission approval, on completion of the Kroger-Albertsons merger, C&S will pay Kroger an all-cash consideration of approximately $2.9 billion, including customary adjustments.

According to a joint statement by Kroger and Albertsons, the current divestiture package includes a modified and expanded store set and additional non-store assets to enable C&S to operate competitively following the completion of the merger. Moreover, the updated divestiture plan continues to ensure no stores will close and that all frontline associates will remain employed.

The updated package boosts the total store count by 166 to encompass 579 stores that will be sold to C&S and maintains the sale to C&S of the QFC, Mariano’s and Carrs banner names. In addition, Kroger will sell the Haggen banner to C&S.

Once the transaction closes, stores under these banners that are retained by Kroger will be re-bannered into one of the retained Kroger or Albertsons Cos. banners.

Following the merger, C&S will license the Albertsons banner in California and Wyoming and the Safeway banner in Arizona and Colorado. In these states, Kroger will re-banner the retained Albertsons and Safeway stores, while maintain ing those two banners in the remain ing states.

Diving in

The following 579 stores (regardless of banner) will be sold by Kroger to C&S:

Washington: 124 Albertsons Cos. and Kroger stores

California: 63 Albertsons Cos. stores

Colorado: 91 Albertsons Cos. stores

Oregon: 62 Albertsons Cos. and Kroger stores

Texas/Louisiana: 30 Albertsons Cos. stores

Arizona: 101 Albertsons Cos. stores

Nevada: 16 Albertsons Cos. stores

Illinois: 35 Albertsons Cos. and Kroger stores

Alaska: 18 Albertsons Cos. stores

Idaho: 10 Albertsons Cos. stores

New Mexico: 9 Albertsons Cos. stores

Montana/Utah/Wyoming: 11 Albertsons Cos. stores

District of Columbia/Maryland/Virginia/Delaware: 9 Harris Teeter stores

All fuel centers and pharmacies associated with the divested stores will remain with the stores and continue to operate.

In connection with these additional stores being conveyed to C&S, the current divestiture package includes increased distribution capacity, the addition of one dairy facility and an expanded corporate and office infrastructure.

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In the simplest form, a ground lease is a long-term net lease (usually 49 years or 99 years) of land including any improvements on the said land. Assets that can be subject to a ground lease include but are not limited to, vacant land, office buildings, and large residential buildings.