Albertsons sues Kroger, backs out of $25B merger after courts block the deal

(WASHINGTON) -- Albertsons has filed a lawsuit against its rival Kroger following a failed multibillion dollar deal that would have marked the biggest supermarket merger in U.S. history.

Two federal judges in Oregon and Washington blocked the merger Tuesday, siding with the Federal Trade Commission, which has opposed the plan, arguing it would eliminate competition and raise prices for American shoppers.

Albertsons announced Wednesday that it had terminated the merger agreement following the failed bid.

"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," Albertsons CEO Vivek Sankaran said in a statement. "We are deeply disappointed in the courts' decisions."

Less than 24 hours after the failed deal, the Boise, Idaho-based retailer also announced it had taken legal action against Kroger.

"Kroger willfully breached the Merger Agreement in several key ways, including by repeatedly refusing to divest assets necessary for antitrust approval, ignoring regulators' feedback, rejecting stronger divestiture buyers and failing to cooperate with Albertsons," the company alleged in a statement Wednesday.

Albertsons claimed the Cincinnati, Ohio-based grocery chain failed to exercise "best efforts" and failed to take "'any and all actions' to secure regulatory approval of the companies' agreed merger transaction as was required of Kroger under the terms of the merger agreement between the parties."

The complaint was filed in the Delaware Court of Chancery against Kroger and is temporarily under seal.

In response to the lawsuit, Kroger released its own statement, calling the suit "baseless."

"Kroger refutes these allegations in the strongest possible terms, especially in light of Albertsons' repeated intentional material breaches and interference throughout the merger process, which we will prove in court," the company claimed. "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 said the company "looks forward to responding to these baseless claims in court."

Tom Moriarty, Albertsons' general counsel and chief policy officer, expressed his disappointment and said the merger "would have delivered meaningful benefits for America's consumers," as well as both companies' employees.

"Rather than fulfill its contractual obligations to ensure that the merger succeeded, Kroger acted in its own financial self-interest, repeatedly providing insufficient divestiture proposals that ignored regulators' concerns," Moriarty claimed in a statement. "Kroger's self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons' shareholders, associates and consumers."

The two supermarket chains first proposed combining forces back in October 2022, sharing a definitive agreement in which Kroger, the second largest U.S. grocery store chain, sought to purchase the fourth largest, Albertsons, for an estimated total enterprise value of $24.6 billion.

Following a three-week hearing in Portland, Oregon, U.S. District Court Judge Adrienne Nelson issued a temporary injunction blocking the merger on Tuesday.

That was followed later on Tuesday by a decision from Judge Marshall Ferguson in Seattle, Washington, who issued a permanent injunction that barred the merger in that state, citing competition concerns and a violation of Washington's consumer-protection laws.

Kroger operates 2,800 stores across 35 states, with brands including Ralphs, Smith's and Harris Teeter. Albertsons operates 2,273 stores in 34 states, including brands like Safeway, Jewel Osco and Shaw's.

Between them, the two grocery chains have more than 700,000 workers and operate almost everywhere in the U.S.

In separate statements following Tuesday's court rulings, both Kroger and Albertsons expressed disappointment and said at the time, they would review their options.

Both the White House and the FTC praised the rulings Tuesday.

"The FTC, along with our state partners, scored a major victory for the American people, successfully blocking Kroger’s acquisition of Albertsons," Bureau of Competition Director Henry Liu said in a statement. "This historic win protects millions of Americans across the country from higher prices for essential groceries -- from milk, to bread, to eggs -- ultimately allowing consumers to keep more money in their pockets."

White House National Economic Council Deputy Director Jon Donenberg said in a separate statement Tuesday, "The Kroger-Albertsons merger would have been the biggest supermarket merger in history -- raising grocery prices for consumers and lowering wages for workers. Our administration is proud to stand up against big corporate mergers that increase prices, undermine workers, and hurt small businesses."

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