Just as the wheels were slowing on Amazon’s acquisition of Whole Foods, the rumor mill stirred up earlier this week with whispers that Ahold Delhaize might be looking to buy up Kroger. According to the Cincinnati Business Courier, speculation that international retailer could move in on the acquisition had the American chain's stock price raise as much as 4 percent on October 3.
“Bloomberg reported that Twitter speculation referenced Ahold reportedly has hired advisers to look into a possible bid for Kroger at $32 a share,” Bruno Monteyne, Bernstein supermarket analyst, wrote in a new report, the source shared–though the trail to those on the case seems at this time to be more a web of hearsay than anything concrete.
Even so, Kroger shares rose nearly 4 percent in early afternoon Tuesday, according to the Courier. Stock prices rose as high as $20.73, up 77 cents, before closing the day up 60 cents, or 3 percent, to $20.56.
While Monteyne believes a deal between the two could likely be in the works, he wrote in his report that any deal between the two would have to be structured as a merger of two equal companies, and that the proposed $32 per share would more likely refer to what the combined companies’ valuation would be after a merger.
“The increased scale would make Ahold Delhaize-Kroger the leading U.S. grocer with buying power and distribution efficiency in line with Walmart but much stronger in ‘food experience’ and online,” Monteyne wrote, according to the source. “Ahold-Kroger…would be the leading player in this unconsolidated market and would have fantastic firepower to compete as the No. 1 player in the U.S. food and grocery market.”
One caveat emerged with Monteyne’s theory, however. As Ahold and Delhaize themselves just merged last year, another deal may take some time to prepare for. He predicts any deal with Kroger coming in another two to three years.
When the Courier reached out for comment, Kroger’s Head of Communications and Media Relations Kristal Howard said the company never comments on rumors or speculation.
If this deal were to ever come to fruition, it could feasibly create a company with $180 billion in U.S. sales, the source reported, putting it nearly as large as Walmart’s grocery operations. Monteyne wrote in his report that the merger could result in "$1.8 billion in synergies," but would likely have to divest 258 stores due to antitrust issues.
While it’s too early to tell if this will be the next major move in grocery retail, you better believe Deli Market News will be keeping a close eye on these two power players.