Acquisition of Albertsons a Credit Negative for Kroger, at Least for Now

DBRS Morningstar believes The Kroger Co.’s (Kroger or the Company) acquisition of Albertsons Companies, Inc. for $24.6 billion (the Acquisition) will have a net negative effect on Kroger’s overall credit risk profile, at least over the near to medium term following the close of the Acquisition. This is based on our view that the initial strain the Acquisition places on Kroger’s financial risk profile, combined with integration and execution risks including uncertainties around the ability to achieve growth, synergy, and deleveraging targets, especially against the backdrop of a weakening macroeconomic environment, outweighs the benefits associated with the Acquisition, which include the Company’s increased size, strengthened market position, improved geographic diversification, and the potential for operating efficiency gains.