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Albertsons announced today it is terminating its proposed $25 billion merger agreement with Kroger and suing the grocer for breach of merger agreement following two rulings in Oregon and Washington issued yesterday blocking the deal.
The lawsuit, filed in the Delaware Court of Chancery and temporarily under seal, seeks hundreds of millions of dollars in damages, according to Albertsons, and accuses Kroger of “repeatedly refusing to divest assets necessary for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers and failing to cooperate with Albertsons,” per a press release.
Tom Moriarty, EVP, general counsel and chief policy officer at Albertsons, said Kroger “acted in its own financial self-interest,” impacting shareholders, associates, and consumers.
In terminating the agreement, Albertsons said it should receive a $600 million termination fee and “relief” from financial resources it exhausted and “unnecessary limbo” it experienced. Bloomberg reported in August the two grocers had spent more than $800 million on merger fees since the deal’s announcement in October 2022.
CEO Vivek Sankaran said in a statement Albertsons is “disappointed” by the court’s decision and will detail a plan forward by its next earnings call in January. “We start this next chapter in strong financial condition with a track record of positive business performance,” he said. Sankaran previously noted during the Oregon trial the deal’s failure would be a tough blow for Albertsons.
Kroger said in a statement the claims are “without merit” and it “refutes these allegations in the strongest possible terms.” On its earnings call last week, CEO Rodney McMullen noted that “regardless of the outcome of the trials, Kroger is operating from a position of strength,” and said it wasn’t likely that Kroger would seek another merger partner should the Albertsons deal not go through.
Oregon Judge Adrienne Nelson yesterday temporarily blocked the merger, siding with the Federal Trade Commission. Washington Judge Marshall Ferguson ruled to block the merger just an hour later, calling it “presumptively anticompetitive.”
Judge Nelson wrote in her opinion that Kroger and Albertsons “engage in substantial head-to-head competition and the proposed merger would remove that competition.” The ruling came nearly three months after the closing arguments of the three-week trial in Oregon.
Nelson noted the two retailers could choose, but weren’t forced, to “abandon” the deal following the ruling. However, Neil Saunders, manager director at Global Data, said in an emailed statement the ruling ended the “likelihood of a deal taking place.”
FTC Bureau of Competition Director Henry Liu called the ruling “a major victory for the American people.”