Albertsons Takes Kroger to Court After Grocery Merger Collapses

Albertsons has sued fellow grocery giant Kroger over the failure of their $24.6 billion merger.

The company said Wednesday (Dec. 11) that it has filed a lawsuit in the Delaware Court of Chancery, accusing Kroger of breach of contract.

The suit came one day after a judge blocked Kroger’s planned acquisition of Albertston’s, pointing to concerns that the deal would hinder competition in the U.S. grocery space. It accuses Kroger of “willfully” violating the merger agreement between the two companies by doing things like refusing to divert assets needed for antitrust approval and ignoring feedback from regulators.

“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,” Tom Moriarty, Albertsons’ general counsel and chief policy officer, said in a news release.

“Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons’ shareholders, associates and consumers,” Moriarty added.

Kroger responded by calling the suit “baseless,” accusing Albertsons of “intentional material breaches and interference” during the merger process.

“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 company said in a statement posted to its website.

“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.”

The merger, first announced in 2022, aimed at creating a strong competitor to nonunion grocery rivals like Walmart.

However, the deal had faced criticism from lawmakers, consumer groups and unions, who said the combination would drive up prices and reduce grocery store options. And the Federal Trade Commission (FTC) had argued the merger would shrink competition in the supermarket sector, saying the companies had sufficiently divested stores to C&S Wholesale Grocers.

Judge Adrienne Nelson ruled in favor of the FTC onTuesday.

“There is ample evidence that the divestiture is not sufficient in scale to adequately compete with the merged firm and is structured in a way that will significantly disadvantage C&S as a competitor,” Nelson wrote. “The deficiencies in the divestiture scope and structure create a risk that some or all of the divested stores will lose sales or close, as has happened in past C&S acquisitions.”