Acme owner Albertsons to be sold to Kroger for $20 billion. The grocery chain seeks growth as Amazon, Gopuff make cuts.

Acme Markets, the Malvern-based supermarket chain that once dominated Philadelphia grocery shopping, and more than 20 other chains owned by Idaho-based Albertsons Cos. are being purchased by rival Kroger, based in Cincinnati, for $20 billion in stock, the companies said Friday. Kroger will also take over nearly $5 billion in Albertsons’ debt.

The deal combines the second- and third-largest U.S. grocers — behind Walmart — who together employ over 700,000 workers at 5,000 food markets, nearly 4,000 drugstores, and 2,000 gas stations. Kroger, the buyer, says it hopes to save an eventual $1 billion by combining food processing, operations and sourcing operations, and adding laborsaving technology.

The merger between two similar chains whose workers are represented by the same labor union “is not the worst thing that could have happened” to Albertsons workers and customers, said Wendell Young IV, president of UFCW Local 1776, which represents 35,000 workers at 100 employers in Pennsylvania and nearby areas, inducing employees at Acme in Pennsylvania and a small part of New York, and Kroger workers across the state line in Ohio.

Albertsons’ previous private-equity owners, including Philadelphia-based Lubert Adler, which manages state pension investments, had tried to sell the company several times in recent years, before taking advantage of the surge in grocery spending, as restaurants shut down in the pandemic, to take the company public through an initial public stock offering (IPO) in 2020.

Young noted that warehouse and delivery companies, which lured away supermarket workers with higher wages and flexible hours during the pandemic, have reversed and begun cutting jobs since the economy slowed.

For example, Amazon this year has at least temporarily shelved plans to open dozens of newly built delivery warehouses, including sprawling sites in East Norriton and Southwest Philadelphia. The company shut another facility in Bellmawr, Camden County.

Philadelphia-based Gopuff, which announced it was cutting 10% of its workers earlier this year, this week gave a few dozen home-based customer-service workers and managers a few weeks’ severance pay, and moved their jobs to a contractor in the Philippines, sources at the company said Thursday and Friday. The company had struggled to find reliable staff while trimming its administrative budget. A Gopuff spokesperson had no additional comment. The company now employs around 10,000.

“A lot of young people who left [for higher-cash warehouse wages] have come back,” Young said. “Amazon’s been laying people off and closing facilities. Gopuff has been laying people off. But our members continue to work and get our wage increases, and both Kroger and Albertsons have been paying our members’ increased health-care costs and increases to retirement plans.”

The companies and union leaders expect that the Federal Trade Commission and state regulators will require them to sell some stores in Midwestern and Western states where the two companies compete, leaving the combination with around one-eighth of U.S. grocery-store sales, trailing only industry leader Walmart, which has about one-quarter of the national market.

Together the chains will be better able to compete with “nonunion” Walmart, Kroger chief executive Rodney McMullen said in a statement. He also predicted faster growth and higher profits.

No other chain holds as much as 5% of the U.S. grocery market, though European-based grocery owners such as Ahold Delhaize, which owns Giant Food, and Aldi have been opening U.S. stores and winning market share, as have privately held chains such as Wegmans.

All the chains, as well as rivals such as Whole Foods owner Amazon, have been investing in smartphone-based home ordering and delivery, and store automation, but have had difficulties making the new services profitable.

The sale price works out to $34.10 a share, a 33% jump from Albertsons’ value since before the stock began rising in anticipation of the deal Thursday, and more than double its price since its public stock offering during the pandemic-shutdown summer of 2020, but below the stock’s peak price of $35.19 in July 2021.

The deal is expected to close in early 2024, the companies said.

Besides a more efficient grocery system, Kroger said it would continue to expand its “alternative profit businesses” such as advertising, personal finance, and customer data sales.

“For a long time, Acme had owners that didn’t invest in the stores,” said Robert Costello, owner of $200 million-asset Costello Asset Management in Feasterville, which is a Kroger shareholder. “They lost market share. Lately they have been much improved, and they’re lucky — you know how Acme customers are loyal to the teeth.”

Still, Costello adds, even in Acme’s Philadelphia-area heartland, local Walmart grocery sections and its discount Sam’s Club stores often draw bigger weekend crowds.