Albertsons sues Kroger, terminates massive grocery merger

Albertsons sued Kroger after a US judge blocked the merger of the supermarket giants, claiming Kroger failed to exercise “best efforts” and take “any and all actions” to secure regulatory approval.

In addition to a $600 million termination fee, Albertsons is seeking “billions of dollars in damages from Kroger to make Albertsons and its shareholders whole” and relief for the years and millions of dollars that went down the drain after the deal failed, the company said.

Albertsons said it terminated the deal.

In a statement, Kroger called the chain’s claims “baseless” and “without merit.”

The grocery chain said Albertsons’ lawsuit, filed in Delaware Court of Chancery, is an attempt to deflect blame after Kroger notified Albertsons of its own breaches of the agreement.

Albertsons shares dipped 0.1% Wednesday afternoon, while Kroger shares jumped 1.4%.

Albertsons said Kroger “willfully” breached their $25 billion merger agreement, which would have created the largest grocery chain in the United States.

Kroger refused to divest assets necessary for antitrust approval, ignored feedback from regulators and failed to cooperate with Albertsons, the company said.

“Rather than fulfill its contractual obligations to ensure that the merger succeeded, Kroger acted in its own financial self-interest,” Tom Moriarty, Albertsons’ general counsel and chief policy officer, said in a statement, adding that the company is disappointed.

The two companies agreed to the merger in October 2022.

It would have combined Kroger, the nation’s largest grocery company, with Albertsons, the second biggest, to create a chain with nearly 5,000 stores across 48 states and Washington, D.C. 

In February, the Federal Trade Commission sued to block the deal on antitrust issues, and argued that their plan to sell 579 of their stores to C&S Wholesale Grocers for $2.9 billion would not be enough to preserve competition. 

Kroger and Albertsons argued the merger would allow them to lower their prices and compete with global conglomerates like Amazon and Walmart – but FTC Chair Lina Khan argued the grocery merger could have the potential to further raise prices.

“Even if those efficiencies arise, if the company’s not checked by competition it won’t have an incentive to pass those benefits on to the consumer because those consumers may not have anywhere else to go,” she said in September.

A federal judge on Tuesday agreed that the merger would remove direct competition and blocked the deal.