Kroger, Target Trade Higher Amid Report The Companies Are Discussing A Merger

Shares of Kroger Co (NYSE: KR) spiked more than 8 percent Thursday morning amid a report the grocer giant is in merger talks with department store Target Corporation (NYSE: TGT).

What Happened

Target and Kroger are in merger talks at a time when the entire grocery and food sector is looking at ways to combat Amazon.com, Inc. (NASDAQ: AMZN)'s "increasing hold" on the market, people familiar with the matter told Fast Company.

Talks between the two companies started last summer to explore a partnership, which would benefit Target's grocery business and give Kroger's customers more access to merchandise and e-commerce, Fast Company said. Discussions were revived last fall and were ongoing this year.

CNBC's Courtney Reagan, however, Tweeted that a "source close to the matter tells me there is no truth" to a combination of Target and Kroger. The Tweet said, "I can report the 2 companies have had meetings" although it was related to merely a Shipt partnership.

Why It's Important

Kroger's name has been mentioned multiple times in M&A rumors but nothing has materialized. For example, Kroger was rumored to have received interest from Dutch retailer Koninklijke Ahold Delhaize last October.

Kroger could in theory be exploring a combination of its business with another large department store or retail chain. The company reported in-line results in its fourth quarter, but a poor outlook for its full fiscal year.

What's Next

Despite Reagan's Tweet suggesting there are no M&A talks on the table, the stock was up about 3.3 percent at $24.16 in pre-market trading. Target was up about 1.7 percent at $70.10.

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Image credit: Nicholas Eckhart, Flickr