Albertsons sues Kroger for breach of contract, calls off merger; Kroger fires back
Albertsons Companies has moved to terminate its merger agreement with The Kroger Co. and has filed a lawsuit suing the grocery store giant for breach of contract.
The move comes the day after the U.S. District Court in Oregon and the King County Superior Court for the State of Washington granted regulators’ requests to block the $24.6 billion deal.
“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,” Vivek Sankaran, CEO of Albertsons, said in a statement. “We are deeply disappointed in the courts’ decisions.”
Albertsons filed breach-of-contract claims in a Delaware chancery court, claiming that Kroger failed to exercise its “best efforts” to secure regulatory approval of the deal.
“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 stated in a press release on Wednesday.
In response, Kroger issued a statement in which it called Albertsons' claims "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," the company said. "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."
Albertsons is seeking billions of dollars in damages along with an immediate $600 million termination fee.
“Albertsons’ shareholders have been denied the multi-billion-dollar premium that Kroger agreed to pay for Albertsons’ shares and have been subjected to a decrease in shareholder value on account of Albertsons’ inability to pursue other business opportunities as it sought approval for the transaction,” the company stated. “Albertsons also seeks to recover for the time, energy and resources it invested in good faith to try to make the merger a success.”
Tom Moriarty, Albertsons’ general counsel and chief policy officer said that a successful merger between Albertsons and Kroger would have delivered “meaningful benefits” for America's consumers, Kroger’s and Albertsons’ employees 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,: Moriarty stated. "Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons’ shareholders, associates and consumers."
As of Sept. 7, 2024, Albertsons operated 2,267 retail food and drug stores with 1,726 pharmacies, 405 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities.
