Grocery chain Kroger to buy rival Albertsons in $24.6B deal

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Grocery chain Kroger will buy rival Albertsons in a deal valued at $24.6 billion, the companies announced on Friday.

"This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors," Kroger CEO Rodney McMullen, who will continue to lead the combined company, said in a statement.

He noted that the transaction is a testament to the passion of the people at Kroger and Albertsons – highlighting that it secures union jobs – and that they believe it will lead to "faster and more profitable growth and generate greater returns for our shareholders."

Kroger .

Together the companies employ over 710,000 people and operate nearly 5,000 stores across 48 states and the District of Columbia.

"Given the similarities in the culture and values at Kroger and Albertsons Cos., I am confident that the combination will also have a positive impact on our associates and the communities we are proud to serve," Albertsons CEO Vivek Sankaran said in a statement.

The deal will up the ante in the food shopping space challenging rivals including Amazon-owned Whole Foods as well as Walmart, Target and Costco. Ticker Security Last Change Change % AMZN AMAZON.COM INC. 112.53 -0.37 -0.33%WMT WALMART INC. 132.28 +1.11 +0.85%TGT TARGET CORP. 154.12 -0.04 -0.03%COST COSTCO WHOLESALE CORP. 467.99 +1.61 +0.35%

Under the terms of the agreement, Kroger is acquiring Albertsons for $34.10 per share and also assuming approximately $4.7 billion of Albertson's net debt.

Kroger said the agreement accelerates its "go-to market strategy" and that it plans to invest in lowering prices going forward, reinvesting around half a billion dollars of cost savings to do so. 

(Bridget Bennett/Bloomberg via Getty Images) / Getty Images)

In addition, an incremental $1.3 billion will also be invested into Albertsons stores to enhance the customer experience. 

Kroger will also build on its recent investments in associate wages, training and benefits, expecting to invest $1 billion to continue that effort.

Albertsons is also prepared to establish a subsidiary, SpinCo, that would be spun-off to Albertsons shareholders immediately before merger closing and operate as a standalone public company. 

Kroger and Albertsons will work to determine which stores would comprise SpinCo, which is estimated to be between 100 and 375 stores.