Kroger to sell its specialty pharmacy business

By Bill Peters

Grocery chain says sale is not connected to proposed merger with Albertsons

Supermarket chain Kroger Co. on Monday agreed to sell its specialty pharmacy business to CarelonRx, a subsidiary of Elevance Health (ELV), saying it would be better off as a standalone segment.

A representative for Kroger (KR) said the sale was "not connected" to its planned $24.6 billion merger with grocery-store chain Albertsons Cos. Inc.

That merger deal has faced increased scrutiny from regulators concerned about the size of the combined company and its potential impact on grocery prices and competition. Both chains want to sell off stores to make the deal more palatable.

Shares of Kroger were down 1.1% after hours.

Kroger's specialty pharmacy business serves patients with chronic illnesses and is separate from other Kroger pharmacies. Terms of the deal were not given, but Kroger said it did not expect the deal to have an effect on its full-year financial outlook. The sale is expected to close in the second half of the year.

"As part of our regular review of assets, it became clear that our strong specialty-pharmacy business unit will better meet its full potential outside of our business," Colleen Lindholz, president of Kroger Health, said in a statement.

"One of the most important considerations was continued operations to ensure minimal disruption to our associates and patients," she said. "We are confident this transaction will help the business to grow and deliver better results for patients."

The Federal Trade Commission last month sued to block the merger between Kroger and Albertsons (ACI), saying it would make groceries more expensive for shoppers following two years of higher prices. Kroger has claimed the merger would actually lower prices.

Kroger and Albertsons have proposed selling off several hundred stores and other properties to C&S Wholesale Grocers, the FTC noted. But the agency said that proposal was "inadequate," and fell "far short of mitigating the lost competition between Kroger and Albertsons."

The FTC said that the combined company would have more than 5,000 stores and approximately 4,000 retail pharmacies.

-Bill Peters

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03-18-24 1905ET

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