Kroger, Albertsons: As We Expected, Federal Trade Commission Sues to Block the Combination

After reviewing narrow-moat Kroger and no-moat Albertsons' planned merger for over a year, the US Federal Trade Commission ultimately deemed the nearly $25 billion deal anticompetitive and sued on Feb. 26 to block it. We have long held that the merger would face insurmountable regulatory scrutiny, thus to us, the decision was not unexpected. While the timing of future litigation and the ultimate court ruling remain uncertain, we still view the proposed deal as unlikely to close, and we do not plan to alter our $53 and $27 per share fair value estimates for Kroger and Albertsons, respectively.