Two potential acquisition targets have popped up for Kroger Co. in the last few weeks, and analysts believe there’s a distinct possibility at least one of those could happen.
Drug store chain Rite Aid and Minneapolis grocery chain Cub Foods both became likely acquisition targets. Rite Aid’s deal to be acquired by supermarket giant Albertsons for $24 billion fell through last week, and Cub Foods parent SuperValu reached a deal three weeks ago to be acquired by grocery distributor United Natural Foods, which said it will sell off SuperValu’s retail business, led by Cub Foods, to focus on the wholesale distribution business.
Kroger doesn’t comment on rumor or speculation, spokeswoman Kristal Howard said.
But analysts view Cincinnati-based Kroger (NYSE: KR), the nation’s largest operator of traditional supermarkets, as a potential buyer for both. They say Cub Foods is the far more likely target. It’s the biggest retail chain in SuperValu’s system with about 80 stores mainly in the Minneapolis-St. Paul area.
Jim Hertel, senior vice president at Long Grove, Ill.-based food retail consultant Inmar Analytics, said Cub Foods is the more likely deal of the two for Kroger.
“I think Cub would be largely incremental to them,” he said. “I’d say to the extent they’d invest in brick-and-mortar, that might make sense.”
The latter point is important because Kroger has been investing hundreds of millions of dollars in recent months in technology and capabilities to boost its digital offerings so customers can order groceries online and get them delivered to their homes. Those deals include its new partnership to sell products in China on one of Chinese online retail giant Alibaba's websites.
