Albertsons has filed a lawsuit against rival Kroger following the collapse of a multibillion-dollar deal that would have marked the largest supermarket merger in U.S. history.
Two federal judges in Oregon and Washington blocked the merger Tuesday, siding with the Federal Trade Commission, which opposed the plan, arguing it would eliminate competition and raise prices for U.S. buyers.
Albertsons announced Wednesday that it had terminated the merger agreement following the failed bid.
“Given recent federal and state court rulings blocking 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 by the courts’ decisions.”
Less than 24 hours after the deal fell through, the Boise, Idaho-based retailer also announced it had filed a lawsuit against Kroger.
The Albertsons logo is displayed at an Albertsons supermarket on August 26, 2024 in Los Angeles, California.
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“Kroger deliberately violated the merger agreement in several key ways, including repeatedly refusing to divest assets necessary for antitrust approval, ignoring feedback from regulators, rejecting stronger buyers, and failing to cooperate with Albertsons,” the company alleged in a statement Wednesday.
Albertsons claimed the Cincinnati, Ohio-based grocery chain failed to make “best efforts” and took “no steps” to obtain regulatory approval for the agreed-upon merger transaction between the companies, as was required of Kroger under the terms of the merger. agreement between the parties. »
The complaint was filed in Delaware Chancery Court against Kroger and is temporarily under seal.
In response to the lawsuit, Kroger issued its own statement, calling the suit “meritless.”
“Kroger denies these allegations in the strongest possible terms, particularly in light of Albertsons’ intentional and repeated violations and interference throughout the merger process, which we will prove in court,” the company asserted. “This is clearly an attempt to deflect responsibility following Kroger’s written notice of multiple violations of the agreement by Albertsons, and to seek payment of merger termination fees, to which they are not entitled .”
Kroger said the company “looks forward to responding to these baseless claims in court.”
A Kroger grocery store in Covington, Kentucky on June 2, 2024.
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Tom Moriarty, Albertsons’ general counsel and chief policy officer, expressed disappointment and said the merger “would have provided significant benefits to American consumers,” as well as employees of both companies.
“Rather than fulfilling its contractual obligations to ensure the success of the merger, Kroger acted in its own financial self-interest, repeatedly offering insufficient divestment proposals that ignored the concerns of regulators,” Moriarty said in a statement. . “Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed-upon transaction, harmed Albertsons shareholders, associates and consumers.”
The two supermarket chains first proposed combining forces in October 2022, sharing a definitive deal in which Kroger, the second-largest grocery chain in the United States, sought to buy the fourth-largest, Albertsons, for a estimated total enterprise value of $24.6 billion.
After a three-week hearing in Portland, Oregon, U.S. District Court Judge Adrienne Nelson on Tuesday issued a temporary injunction blocking the merger.
That was followed later Tuesday by a ruling from Judge Marshall Ferguson of Seattle, Washington, who issued a permanent injunction barring the merger in that state, citing competition concerns and a violation of Washington’s consumer protection laws.
Kroger operates 2,800 stores in 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 employees and are present almost everywhere in the United States.
In separate statements following Tuesday’s court rulings, Kroger and Albertsons both expressed disappointment and said at the time they would review their options.
The White House and the FTC welcomed the decisions Tuesday.
“The FTC, along with our state partners, has achieved a major victory for the American people by successfully blocking Kroger’s acquisition of Albertsons,” Competition Bureau Director Henry Liu said in a statement. “This historic victory protects millions of Americans across the country from rising prices for essential groceries – from milk to bread to eggs – 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 largest supermarket merger in history – raising food prices for consumers and lowering workers’ wages. in the face of large corporate mergers that raise prices, disempower workers and hurt small businesses. »
