Kroger files counterclaim against Albertsons
In the wake of the two grocery companies’ failed $24.6 billion merger, The Kroger Co. has filed a legal response to Albertsons Cos’s earlier lawsuit against it.
Kroger is claiming that while it was working to seek regulatory approval and close the merger, Albertsons was engaging in a secret campaign alongside C&S Wholesale Grocers to pursue its own regulatory strategy, which ultimately undermined Kroger's efforts.
Kroger says that as a result of its misconduct, Albertsons is not entitled to the $600 million termination fee under the terms of the parties' merger agreement, nor is Albertsons entitled to other damages it is seeking. The alleged misconduct included incoming Albertsons CEO Susan Morris’ “secret communications with C&S's CEO and others, utilizing personal emails and cell phones to advance Albertsons's strategy.”
With these counterclaims, Kroger is seeking damages from Albertsons as a result of its misconduct and breaches of the merger agreement. Kroger says it will seek to recover the investment it made to obtain regulatory approval for the merger while Albertsons was working to undermine it.
In its December lawsuit, Albertsons claimed that Kroger made a willful breach of contract and breach of the covenant of good faith and fair dealing since the company failed to exercise “best efforts” and to take “any and all actions” to secure regulatory approval of the companies’ agreed merger transaction.
Albertsons asserted that Kroger willfully breached the companies’ merger agreement by refusing to divest the necessary assets for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers and failing to cooperate with Albertsons.
Kroger had refuted Albertsons’ claims, which it asserted were “baseless and without merit.”
Earlier this month, C&S filed its own claim that Kroger should pay a $125 million termination fee. C&S had a major stake in the deal, planning to pick up nearly 600 Kroger and Albertsons stores, distribution centers and other assets as part of a divestiture plan.
Per The Wall Street Journal report, C&S argued that Kroger needs to meet the terms of an agreement. "Kroger failed to identify any reason for its refusal to pay the termination fee it owed C&S — because there is none," C&S asserted in a legal filing.
In an email to Progressive Grocer, Kroger maintains that it doesn’t owe the fee. "It is disappointing that C&S has decided to file a baseless lawsuit when it is clear that C&S forfeited its right to a termination fee and has no reasonable claim to any damages. Kroger will vigorously defend itself," a company representative wrote.
C&S was also named in the Albertsons case filed this past December. In its complaint, Albertsons contended that the initial divestiture package was deficient and didn’t take into account C&S’ feedback.