Albertsons is seeking more than $8 billion in damages from Kroger as both grocers head to a Delaware court on Oct. 19 in a lawsuit over their failed merger.
Nearly two years after the deal collapsed, each grocer continued to blame the other for the failure to win regulatory approval in dueling Oct. 12 filings, according to newly unsealed court documents. Both portray their former would-be partners as too busy greedily grabbing for money or assets to competently convince state and federal officials of the deal's merits.
The audacious $25 billion planin October 2022 which would have allowed the Cincinnati-based supermarket giant to take over its West Coast rival stunned the retail industry. Had it succeeded, the deal would have affected nearly 5,000
U.S. stores, 700,000 workers and about one sixth of the nation’s $1 trillion food market.
But from the start, critics raised antitrust concerns about reducing competition for grocery dollars and how that could spur further food inflation. The country was already grappling with sharply rising food prices amid the lingering COVID-19 pandemic and in the aftermath of Russia’s invasion of Ukraine.
The merger died in December 2024 aftertwo rulings by a federal judge and a Washington state judge that blocked the companies from combining. Both decisions were subject to appeal but would have taken months to pursue after the grocers had already spent two years trying to get their deal done. Albertsons called the deal offa day after the decisions and sued Kroger for botching the merger.
Albertsons claims Kroger failed to use 'best efforts' save merger
Albertsons is suing Kroger for payment of the $600 million “termination fee” that was to be paid in the event the deal didn’t go through as well as other damages that exceed the value of all outstanding Albertsons stock. The Boise, Idaho-based grocer's market capitalizationis $6.1 billion.
In its filing, Albertsons said Kroger ignored its own lawyers’ advice to give up more and better-performing stores to win regulatory approval. Doing so violated its agreement with Albertsons to use its “best efforts” to secure the blessing of regulators.
“Kroger gave that commitment, agreeing to ‘use best efforts, to take … any and all actions’ … to remove any antitrust impediment to the merger,” Albertsons attorneys wrote. “Kroger wanted the merger but only on its own terms … to hit those targets, Kroger had to minimize the value of divested assets.”
Kroger claims Albertsons' $4B payout drew early opposition to merger
Kroger said Albertsons’ actions attracted early opposition to the merger. In connection with the deal, Albertsons said it would pay shareholders a one-time special dividend that paid out $4 billion to shareholders, including its largest shareholder private equity firm Cerberus Capital Management. The Cincinnati-based retailer said it sought regulatory approval but received “scant feedback” from government officials whose “shifting rationales” for rejecting divesture proposals led the merger to court.
Further, they noted a new general counsel hired by Albertsons in June 2023 altered the grocers’ working relationship for the worse. The grocer said Albertsons undermined its efforts to work with regulators.
“This marked a sea change in Kroger's relationship with Albertsons,” Kroger said in its filing. “The tone shifted almost immediately, and Albertsons and its outside counsel began treating Kroger and its outside counsel as adversaries rather than partners.”
Kroger argued Albertsons wasn’t entitled to the breakup fee because it ultimately breached its agreement to work with Kroger to seek regulatory approval.
“Albertsons breached its obligations in material respects by seeking to undermine Kroger's principal strategic responsibility,” Kroger said. “As such, Albertsons is not entitled to the parent termination fee.”
The civil bench trial is slated to begin on Oct. 19. The trial is expected to last roughly two weeks.
This article originally appeared on Cincinnati Enquirer: Albertsons seeks more than $8B from Kroger over failed merger
