Busted Kroger-Albertsons merger means no Piggly Wiggly stores for New Mexico — at least for now

Greg Frazier said he and other members of United Food and Commercial Workers Local 1564 were “feeling good” after the Kroger and Albertsons merger fell apart, the latter grocery company deciding to pull out and sue the former after two judges on Tuesday in separate court cases halted the multi-billion-dollar deal.

“Right now, the workers are excited that they can just focus on the customers,” said Frazier, president of the union, which represents thousands of New Mexico meat cutters and retail workers at Albertsons and Kroger.

Frazier’s comments come as the two companies saw their merger — what would have been the biggest grocery store deal in U.S. history — blocked by judges in Oregon and Washington.

U.S. District Judge Adrienne Nelson issued a preliminary injunction blocking the merger Tuesday following a three-week hearing in Portland, Oregon, The Associated Press reported. An hour later, Judge Marshall Ferguson in Seattle issued a permanent injunction prohibiting the merger in Washington after finding it would reduce competition in the state.

As a result, Albertsons on Wednesday filed a lawsuit against Kroger in the Delaware Court of Chancery, alleging Kroger didn’t do enough to secure regulatory approval and is “seeking billions of dollars in damages from Kroger to make Albertsons and its shareholders whole,” according to a news release from Albertsons, a Boise, Idaho-based grocery chain.

In New Mexico, the $25 billion merger would have led to the sale of nine Albertsons Market stores, including four in Albuquerque, to grocery distributor C&S Wholesale Grocers. It was part of a larger divestiture plan that would have seen Kroger and Albertsons sell off 579 stores across the country to the New Hampshire-based distributor, along with six distribution centers and a dairy plant.

Federal officials, however, argued in court that C&S, which manages the supermarket brands Piggly Wiggly and Grand Union, could not successfully operate the additional stores. A C&S spokesperson said the aborted merger ultimately terminated the divestiture agreement with C&S. It’s unclear if Albertsons still plans to sell the nine New Mexico stores — which also include Albertsons and Safeway markets in Rio Rancho, Taos, Los Lunas and Farmington — in the future.

“This does not change C&S’s position as a market leader or our plans for future growth,” C&S spokesperson Lauren La Bruno said. “We remain committed to our transformation strategy, which includes expansion into retail as well as evolving our capabilities and reach to better serve our wholesale customers.”

New Mexico officials over the past year have argued the merger would have decreased the options for shoppers in the state, with New Mexico Attorney General Raúl Torrez calling the merger “anti-competitive” in a February announcement, saying he joined eight other attorneys general in the Federal Trade Commission lawsuit in Oregon.

A spokesperson for the New Mexico Department of Justice on Wednesday called the decision on Tuesday “a victory for customers” and said the blocking of the merger protects them from higher prices and reduced options.

“By preserving competition, the ruling ensures New Mexicans continue to benefit from affordable groceries, quality products and strong worker protections,” said Lauren Rodriguez, spokesperson for NMDOJ.

Last August, New Mexico Secretary of State Maggie Toulouse Oliver signed a letter to the FTC Chair Lina Khan, arguing the merger would eliminate choice for consumers and “have implications for local suppliers, farmers and small businesses that rely on a competitive grocery market.”

A spokesperson for Toulouse Oliver on Wednesday told the Journal the secretary is “pleased that regulators decided to block this merger, which will preserve competition in the marketplace and ensure access to quality grocery options for New Mexico communities.”

That’s also the sentiment held by Reilly White, an economist and professor with the University of New Mexico’s Anderson School of Management, who said the merger could have had “the effect of raising prices in communities that are already underserved by grocery stores.”

“That is much of the state in New Mexico,” White said. “Even in Albuquerque, for instance, if we look at the big players outside of Costco and Sam’s Club, you are looking at Albertsons and Smith’s. … The amount of competition isn’t immense.”

The failed merger doesn’t mean shifts won’t take place in New Mexico’s grocery market scene in the coming years, White added. Albertsons is about $8 billion in debt, he said, and that “is nothing to sneeze at for a company its size.”

“My guess is, in calmer times, Albertsons will start looking at other potential deals,” White said. “It’s going to be really interesting to see what Albertson does, what Kroger does, what C&S does.”

Albertsons, which has dozens of stores across the state, didn’t respond to questions about what the failed merger means for stores in New Mexico, including if it plans to shut down stores. It referred the Journal to its website, which shows two recent news releases announcing the lawsuit against Kroger and the termination of the merger agreement. The company’s CEO said in federal court in September that it could potentially shut some stores down and lay off workers if the deal didn’t go through.

There’s nothing “to share about specific potential impacts in New Mexico,” a Kroger spokesperson, Erin Rolfes, told the Journal. The company has two dozen Smith’s stores in New Mexico and around 2,650 employees.

Frazier said the failed merger means more flexibility in negotiating new contracts for the union, which will take place in June. He said in recent years, Albertsons made deals with UFCW Local 1564 before Kroger, which he referred to as “a little bit more obnoxious or ornery.”

“We felt like we were going to lose the ability to negotiate with two companies instead of one, which would cause the workers to lose a little bit of leverage and strength,” Frazier said. “We weren’t comfortable with Kroger being the sole employer and the only employer that we would be negotiating with.”