After a federal court blocked the multibillion proposed merger between grocery retailers Kroger and Albertsons on Tuesday, Albertsons has backed out of the deal, and filed a lawsuit against Kroger.
Kroger, based in Cincinnati, Ohio, operates 2,750 stores in 35 states and the District of Columbia, including the chains Harris Teeter, Mariano’s, Ralphs and Smith’s. Albertsons, based in Boise, Idaho, operates roughly 2,300 stores in 34 states, including brands like Jewel Osco, Safeway and Shaw’s. Together the companies employ around 700,000 people. Under the merger agreement, Kroger and Albertsons (who compete in 22 states) had agreed to sell 579 stores in places where their locations overlap to C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly store brands.
Two federal judges in Oregon and Washington blocked the merger – which would have marked the biggest supermarket merger in U.S. history – instead siding with the Federal Trade Commission, which has opposed the plan. The FTC has argued the merger would eliminate competition, and raise prices for American shoppers.
Albertsons CEO Vivek Sankaran said in a statement: “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. We are deeply disappointed in the courts’ decisions.”
In a separate statement issued Wednesday, Albertsons said it is suing Kroger for willful breach of contract and breach of the covenant of good faith and fair dealing: “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.” Albertsons also claims that Kroger failed to exercise “best efforts” and failed to take “‘any and all actions’ to secure regulatory approval of the companies’ agreed merger transaction as was required of Kroger under the terms of the merger agreement between the parties.”
In response to the lawsuit, Kroger released its own statement, calling the suit “baseless” and adding that “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 claimed. “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. We look forward to responding to these baseless claims in court.”
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