Amazon could buy 100s of grocery stores being divested by Kroger and Albertsons, according to a top research firm

• Kroger and Albertsons are trying to complete a giant grocery merger.
• The companies are divesting hundreds of stores as part of the deal.

Amazon could buy hundreds of grocery stories being divested by Kroger and Albertsons, giving the internet giant's physical retail efforts a major boost, according to a top research firm.

Earlier this month, Amazon CEO Andy Jassy highlighted the grocery business in his annual shareholder letter. The company has struggled in this part of the retail sector for years. It's 13.7 billion Whole Foods acquisition from 2017 has not gone well, and the grocery chain laid off hundreds of employees recently.

Amazon has also shut some Amazon Go and Amazon Fresh locations. But Jassy is not giving up.

"To have a larger impact on physical grocery, we must find a mass grocery format that we believe is worth expanding broadly," he wrote in his letter, while adding that Amazon needs "a broader physical store footprint given that most of the grocery shopping still happens in physical venues."

This week, analysts at Bernstein laid out a model for the company to grow in grocery by embracing more acquisitions. In a note published this week, the firm suggested Amazon could buy some or all of the divested stores from the planned Kroger and Albertsons merger. The combined companies are expected to divest at least 500 stores.

"Buying the divested Kroger/Albertsons stores should definitely be on the table at Amazon," the analysts wrote. Amazon declined to comment.

Late last year, the two grocery chains proposed a proposed $25 billion deal. But to close the transaction, the companies must divest stores, especially in regions where the companies will have overlapping stores, and a high percentage of sales.

That presents an opportunity for Amazon, Bernstein analysts wrote. The authors described several scenarios for the company, such as quickly rebranding stores or focusing on stores in particular regions. A deal could help Amazon build physical scale and reach in the grocery sector more quickly, the authors added.

"In theory, Amazon could plug acquired stores into its network, which would (potentially at least) prove less painful and costly than building a distribution and logistics network from scratch," they wrote.

The stores likely to be sold are mostly in areas that would be attractive to Amazon. And there's finite real estate available in those regions, the analysts also noted.

The selling price of these divested assets is likely to be very attractive, at about three to four times earnings, before interest tax, depreciation and amortization. "This would be a very rare opportunity in US retail — one that seems to align well with the goals Jassy lays out," the Bernstein analysts explained.

The authors cautioned that these scenarios were hypothetical and added that if Amazon got involved that might create new antitrust concerns. Although they said that was unlikely.