One multi-billion merger partner bailed out after two court rulings went against the long-pending Kroger-Albertsons merger.
Albertsons has gone from being a merger partner with Kroger to seeking billions over the deal, which has gone sour.
The $24 billion merger was first announced in 2022. The issue of whether the Albertsons-Kroger marriage would help or hurt completion has been fought out in the courts.
Kroger responded to the negative court decisions, saying, “Through its proposed merger with Albertsons, Kroger would invest more than $1 billion in lower grocery prices, an additional $1 billion in higher grocery worker wages, and an additional $1.3 billion to improve Albertsons stores.
“Kroger is disappointed in the opinions issued by the U.S. District Court for the District of Oregon and the Washington State Court, which overlook the substantial evidence presented at trial showing that a merger between Kroger and Albertsons would advance the company’s decades-long commitment to lowering prices, respecting collective bargaining agreements, and is in the best interests of customers, associates, and the broader competitive environment in a rapidly evolving grocery landscape. The company is currently reviewing its options.”
Albertsons, meanwhile, sued Kroger.
It announced that Albertsons Companies Inc. (NYSE: ACI) filed a lawsuit against Kroger Co. (NYSE: KR) in the Delaware Court of Chancery, bringing claims for willful breach of contract and breach of the covenant of good faith and fair dealing arising from Kroger’s failure to exercise “best efforts” and to take “any 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.
Under the Court of Chancery rules, Albertsons’ complaint against Kroger is temporarily under seal.
According to the Albertsons filing, 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.
Tom Moriarty, Albertsons’ general counsel and chief policy officer, said: “A successful merger between Albertsons and Kroger would have delivered meaningful benefits for America’s consumers, Kroger’s and Albertsons’ associates, and communities across the country. Rather than fulfill its contractual obligations to ensure the merger succeeded, Kroger acted in its financial self-interest, repeatedly providing insufficient divestiture proposals that ignored regulators’ concerns. Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons’ shareholders, associates, and consumers. We are disappointed that the opportunity to realize the merger’s significant benefits has been lost because of Kroger’s willfully deficient approach to securing regulatory clearance.”
Moriarty continued: “We are taking this action to enforce and preserve Albertsons’ rights and to protect the interests of our shareholders, associates, and consumers. We believe strongly in the merits of our case and look forward to presenting it to the Court to hold Kroger responsible for the harm it has caused.”
Albertsons’ claims against Kroger are confirmed by the recent rulings from the U.S. District Court for the District of Oregon and the King County Superior Court for the State of Washington, which granted regulators’ requests to block the merger. Those results could have been avoided but for Kroger’s breaching conduct.
Albertsons is seeking billions of dollars in damages from Kroger to make Albertsons and its shareholders whole. Albertsons’ shareholders have been denied the multi-billion-dollar premium that Kroger agreed to pay for Albertsons’ shares and have been subjected to a decrease in shareholder value on account of Albertsons’ inability to pursue other business opportunities as it sought approval for the transaction. Albertsons also seeks to recover money for the time, energy and resources it invested in good faith to try to make the merger successful.
In light of the Oregon and Washington courts’ rulings enjoining the company’s proposed merger with Kroger and Kroger’s failure to close the merger before the contractual deadline to do so, Albertsons has notified Kroger of its decision to terminate the merger agreement. This termination entitles Albertsons to an immediate $600 million termination fee and removes contractual constraints on Albertsons’ ability to pursue other strategic opportunities.
In addition to the $600 million termination fee, Albertsons is entitled to relief reflecting the multiple years and hundreds of millions of dollars it devoted to obtaining approval for the merger, along with the extended period of unnecessary limbo Albertsons endured as a result of Kroger’s actions. Albertsons further seeks to recover certain expenses and costs.
Albertsons Companies is a top food and drug retailer in the United States, operating 2,267 retail food and drug stores, 1,726 pharmacies, 405 associated fuel centers, 22 dedicated distribution centers, and 19 manufacturing facilities.
Albertsons operates stores across 34 states and the District of Columbia under more than 20 well-known banners, including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets, and Balducci’s Food Lovers Market.
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