Albertsons has backed out of its $25 billion merger with Kroger, and is suing the grocery chain, saying it did not do enough to secure regulatory approval for the agreement.
It comes after both a federal and state judge blocked the deal on Tuesday, which would have been the largest grocery store merger in US history.
The companies said a merger, which was originally proposed in 2022, would help them better compete with big retailers like Walmart, Costco and Amazon.
But the deal faced three separate legal challenges, including one filed by the Federal Trade Commission, which argued that if the companies combined it would reduce competition and push up grocery prices for consumers.
U.S. District Court Judge Adrienne Nelson issued a preliminary injunction blocking the merger Tuesday after holding a three-week hearing in Portland, Oregon.
An hour later, Judge Marshall Ferguson in Seattle issued a permanent injunction barring the merger in Washington after concluding it would lessen competition in the state and violate consumer-protection laws.
On Wednesday, Albertsons said that Kroger failed to exercise ‘best efforts’ and to take ‘any and all actions’ to secure regulatory approval of the proposed merger, according to AP News.
The company argued Kroger repeatedly refused to divest assets necessary for antitrust approval, ignoring regulators’ feedback, and failed to co-operate with Albertsons.
Albertsons has backed out of its $25 billion merger with Kroger, and is suing the grocery chain, saying it did not do enough to secure regulatory approval for the agreement
‘Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons’ shareholders, associates and consumers,”‘ said Tom Moriarty, Albertsons’ general counsel, in a statement.
Kroger said that it disagrees with Albertsons ‘in the strongest possible terms.’
It said early Wednesday that Albertsons was responsible for ‘repeated intentional material breaches and interference throughout the merger process.’
Shares of Albertsons rose more than 2 percent at the opening bell as investors reacted to the news, while Kroger’s stock rose slightly.
Both supermarket chains have spent hundreds of millions of dollars over the past two years on the deal, which would have created a $200 billion company with 5,000 supermarkets across the country, The New York Times reported.
A customer picks up bacon at a Safeway supermarket, a subsidiary of Albertsons, in Washington, DC, in October 2022
Federal and state judges blocked the merger deal between Albertsons and Kroger on Tuesday, which would have been the largest grocery store merger in US history
The two chains compete in 22 states, but have significant overlap in some markets, including Los Angeles, Seattle and Chicago.
Under the merger agreement, the companies had taken steps to try to allay regulators’ concerns about market concentration.
Albertsons and Kroger had agreed to sell 579 stores in places where their locations overlapped with C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly store brands.
The regulators were still skeptical, however, that these store sales would resolve concerns around competition and potential price hikes for Americans.
