By George Anderson
If the rumors are true and Kroger's bid for Albertsons eventually leads to a takeover of its grocery rival, then the stage will be set for the combined company to take on Wal-Mart.
Wal-Mart would still be number one in the sale of groceries ($115.1 billion last year), but the combination of Kroger and Albertsons would move the company into a solid second position at more than $95 billion.
The deal, should it go through, would not be a clear cut win for Kroger. The retailer would gain added clout and move into markets where it doesn't have any presence while gaining added share in others where it has been competing with Albertsons for customers.
But, as many pointed out in a report in The Wall Street Journal, companies have found acquisitions often do little to improve performance.
"We have not found that consolidation has significantly helped grocery retailers," says Paul Weitzel, vice president of Willard Bishop Consulting. "A lot of the big chains went after scale to compete against Wal-Mart, and what they've found was that scale does not always mean efficiencies."
Lehman Brothers Holdings analyst Meredith Adler also has concerns. She wrote in a note to clients that acquiring Albertsons "would create a distraction for a company already dealing with the threat of Wal-Mart's expansion."
Moderator's Comment: Would a deal to buy Albertsons be good for Kroger? What do you see as the opportunities and challenges the company would face should the rumored deal take place? - George Anderson - Moderator
Kroger buys Albertsons: good deal or bad?