US grocery retail giant Albertsons has officially abandoned its planned merger with Kroger, citing recent legal setbacks as the impetus for the dissolution of the agreement.
The decision follows injunctions issued by the US District Court in Oregon and the King County Superior Court in Washington, both on 10 December 2024, effectively stalling the proposed consolidation.
Albertsons chief executive officer Vivek Sankaran said: “Given the recent federal and state court decisions to block our proposed merger with Kroger, we have made the difficult decision to terminate the merger agreement. We are deeply disappointed in the courts’ decisions.”
In a strategic countermove, Albertsons has initiated legal proceedings against Kroger in the Delaware Court of Chancery.
The lawsuit accuses Kroger of willful contractual breaches and failing to uphold its obligation of good faith and fair dealing. Specifically, Albertsons alleges that Kroger did not adequately pursue regulatory approval for the merger as stipulated in their agreement.
Currently, details of Albertsons' complaint remain confidential under the court's sealing rules.
The grocery chain contends that Kroger's actions or lack thereof were instrumental in undermining the merger.
Alleged infractions include Kroger's refusal to divest assets as required for antitrust clearance, neglecting regulatory feedback, dismissing more suitable divestiture candidates and a general lack of cooperation with Albertsons throughout the process.
Supporting Albertsons' claims are recent judicial rulings from federal and state courts that sided with regulators' motions to prevent the merger.
According to Albertsons, these outcomes were directly linked to Kroger's non-compliant behaviour.
Albertsons is now seeking billions from Kroger as compensation for damages incurred. The lawsuit aims to recover losses for Albertsons' shareholders who were poised to receive a substantial premium for their shares and now face devalued share prices due to missed alternative business ventures while the merger was pending.
Additionally, Albertsons seeks restitution for resources expended in pursuit of a successful union.
Kroger has dismissed these allegations as unfounded and baseless, insisting that its actions have been consistent with maintaining the integrity of the merger agreement.
In a statement, Kroger said: “This is clearly an attempt to deflect responsibility following Kroger's written notification of Albertsons' multiple breaches of the agreement, and to seek payment of the merger's break fee, to which they are not entitled.”
Kroger anticipates defending its position in court and maintains that it has diligently adhered to its obligations throughout the regulatory scrutiny process.
The company stated: “We are confident in Kroger's value creation model to drive sustainable growth. Kroger's board of directors is currently evaluating next steps that serve the best interests of Kroger's customers and associates, and create value for shareholders."
The initial merger agreement between Kroger and Albertsons was proposed in October 2022 but quickly became mired in controversy as stakeholders including lawmakers and consumer advocacy groups voiced concerns about its potential anti-competitive effects on the US grocery market.
The Federal Trade Commission stepped into the fray by filing a lawsuit in February 2024 aimed at blocking the merger on the grounds that it would likely result in increased grocery prices for millions of American consumers.
