BOISE, Idaho—A day after a federal judge blocked the $25 billion merger of grocery giants Albertsons and Kroger, Albertsons files a multi-billion-dollar lawsuit against Kroger for breach of merger agreement.
The lawsuit filed in the Delaware Court of Chancery, is bringing claims for willful breach of contract and breach of the covenant of good faith and fair dealing alleging that Kroger failed to exercise “best efforts” and 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 a press release by Albertsons, it alleged that Kroger repeatedly refused to divest assets necessary for antitrust approval, ignored regulators’ feedback, rejected stronger divestiture buyers and failed to cooperate with its partner Albertsons.
“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. Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons’ shareholders, associates and consumers,” Tom Moriarty, Albertsons’ General Counsel and Chief Policy Officer, released in a statement. “We are disappointed that the opportunity to realize the significant benefits of the merger has been lost on account of Kroger’s willfully deficient approach to securing regulatory clearance.”
He added, “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.”
King County Superior Court Judge Marshall Ferguson ruled on December 10 that the proposed merger of grocery giants Kroger and Albertsons is unlawful and cannot go forward. The decision came following a September trial in Attorney General Bob Ferguson’s antitrust case challenging the merger.
Earlier on that same day, Oregon U.S. District Judge Adrienne Nelson issued a temporary injunction ruling that the $24.6 billion Kroger-Albertsons merger would limit competition and harm consumers.
Judge Nelson said that supermarkets Kroger and Albertsons are “distinct from other grocery retailers” and are not direct competitors to Walmart, Amazon and other companies who sell non-grocery goods.
“The overarching goals of antitrust law are not met,” Judge Nelson wrote in the decision.
Albertsons alleges that the courts’ rulings could have been avoided is it weren’t “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 for the time, energy and resources it invested in good faith to try to make the merger a success.
Albertsons notified Kroger of its decision to terminate the merger which entitles Albertsons to an immediate $600 million termination fee, according to the grocer.
In addition to the $600 million termination fee, Albertsons says it 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.”
Kroger and Albertsons are the two largest supermarket chains in Washington and the second and fourth largest supermarket operators in the country. More than half of all supermarkets in Washington state are currently owned by either Kroger or Albertsons, and they account for more than 50% of all supermarket sales in the state. Albertsons owns Safeway and Haggen, while Kroger owns QFC and Fred Meyer.
Collectively, Kroger and Albertsons operate more than 300 supermarkets in Washington, including approximately 194 in the Seattle-Tacoma-Bellevue metropolitan area. They currently have more than 700,000 employees in nearly 5,000 stores across 49 states. They have combined annual revenue in excess of $200 billion.
Author: Mario Lotmore
