business news in context, analysis with attitude

Interesting piece by Seattle Post-Intelligencer columnist Bill Virgin in which he asks if an acquisition of Albertsons by Kroger would result in “a very large, financially strong, nimble grocery-store chain with a clearly and broadly understood profile in growing, vibrant markets and niches,” or “a very large grocery-store chain with a vaguely defined market position and so-so financials.”

The only thing that seems to be sure is that it would be large.

“It would hardly be the first time that a corporate combination was undertaken with the hope that the resulting whole would be greater than the sum of its parts,” Virgin writes, suggesting that such a merger/acquisition would only have as its rationale the creation of a company that would approach Wal-Mart in terms of size and scale.

But the problem, he suggests, is that such a deal wouldn’t really solve the problem that both companies have – they are relentlessly mainstream, competing with Wal-Mart on the playing field that it understands and dominates, rather than staking out a strategic position that differentiates them from Wal-Mart.
KC's View:
We agree with this completely. In fact, we wish we’d put it as succinctly as Virgin’s column did.

You have to wonder whether such a merger/acquisition would do anything more than add size, and in fact would create a behemoth that would be too cumbersome to move quickly and nimbly to compete effectively.

Neither Kroger nor Albertsons has been able to individually come up with the magic bullet that will slow Wal-Mart’s expansion. There is little evidence that the combination of the two companies will be able to do any better.