Albertsons Backs Out of Merger and Sues Kroger Following Failure of Planned Deal

After news emerged that the Albertsons and Kroger merger had been blocked in the wake of two separate injunctions — one coming from the U.S. District Court in Oregon and the other from the King County Superior Court for the State of Washington, according to Progressive Grocer — Albertsons has decided to back out of the merger and file a lawsuit against Kroger.

With the company’s website presenting a statement on Dec. 11, one which outlines that it is seeking “billions of dollars in damages from Kroger to make Albertsons and its shareholders whole,” it appears that the legal proceedings concerning these two massive grocers are just getting started.

Albertsons Alleges Willful Breach of the Merger Agreement by Kroger

Lodged via the Delaware Court of Chancery, Albertsons’ lawsuit accuses Kroger of having broken a covenant of good faith and fair dealing due to Kroger’s “failure to exercise ‘best efforts’ and to take ‘any and all actions’ to secure regulatory approval of the companies’ agreed merger transaction.”

The statement went on to indicate that the above was necessary to fulfill the requirements of the planned merger agreement.

Regarding the billions in damages, the company indicated it was entitled to $600 million immediately as part of a termination fee and that it would be seeking further compensation for the years of effort — and hundreds of millions of dollars in investment — into the pathway toward the merger.

Tom Moriarty, the grocer’s general counsel and chief policy officer, underscored the impetus behind the company’s filing against Kroger.

“A successful merger between Albertsons and Kroger would have delivered meaningful benefits for America’s consumers, Kroger’s and Albertsons’ associates, and communities across the country. 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. Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons’ shareholders, associates and consumers. We are disappointed that the opportunity to realize the significant benefits of the merger has been lost on account of Kroger’s willfully deficient approach to securing regulatory clearance,” he wrote.

“We are taking this action to enforce and preserve Albertsons’ rights and to protect the interests of our shareholders, associates and consumers. We believe strongly in the merits of our case and look forward to presenting it to the Court to hold Kroger responsible for the harm it has caused,” he continued.

Kroger Responds to Albertsons’ Claims

Kroger was quick to respond to claims coming from the other grocer, refuting them entirely in a press release.

“Albertsons’ claims are baseless and without merit. 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. 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,” the statement read.

“Kroger looks forward to responding to these baseless claims in court. We went to extraordinary lengths to uphold the merger agreement throughout the entirety of the regulatory process and the facts will make that abundantly clear. We are incredibly proud of the Kroger team for how they worked through the merger process with the highest degree of integrity and commitment,” the company concluded.

As Oregon Public Broadcasting (OPB) detailed, both companies are mainstays of the American grocery business — precisely why the merger was under such fierce scrutiny, as it threatened to reduce competition. The outlet indicated that Kroger operates 2,700 stores nationwide, and Albertsons a bit less, at 2,269.

Combined, the two grocers employ over 700,000 individuals.