The Kroger Co. corporate headquarters is seen in downtown Cincinnati. (Photo by Scott Olson/Getty Images)
On Wednesday, the day after a federal judge in Oregon and a state judge in Washington blocked a merger between two supermarket giants, Albertsons canceled the $24.6 billion merger agreement and sued Kroger.
The grocery chain, which owns 24 Albertsons locations and 97 Safeway stores in Oregon, sued Kroger in the Delaware Court of Chancery, alleging the larger grocer didn’t do enough to secure regulatory approval for its 2022 agreement to buy Kroger.
The Federal Trade Commission, joined by seven states including Oregon and the District of Columbia, sued to block the merger in U.S. District Court in Oregon earlier this year, and a federal judge in Portland temporarily halted the merger Tuesday. A state judge in Washington state also blocked the merger from proceeding there. Both judges agreed with federal regulators and state attorneys general that the merger would lead to reduced competition and harm both customers and grocery workers — customers with higher prices and lower-quality goods and workers with lower pay.
The complaint Albertsons filed in the Delaware court isn’t yet public, but the company said in a press release that Kroger “willfully breached” the merger agreement by ignoring feedback from regulators, refusing to divest assets needed for antitrust approval or find stronger buyers for divested assets and failing to cooperate with Albertsons.
Kroger owns 51 Fred Meyer stores in Oregon, as well as four QFC locations in Portland. Before the merger fell apart, Kroger and Albertsons had agreed to sell 579 stores across the country, including dozens in Oregon, in an attempt to mollify regulators concerned about a monopoly.
Tom Moriarty, Albertsons’ general counsel and chief policy officer, said in a statement that the merger would have helped consumers but that Kroger acted in its own financial self-interest instead.
“Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons’ shareholders, associates and consumers,” Moriarty said. “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.”
Albertsons is seeking an immediate $600 million termination fee and billions more to reimburse the company for the loss of the money Kroger agreed to pay and decreases in shareholder value, the statement said.
Kroger called Albertsons’ claims “baseless” and said that Albertsons actually repeatedly breached their agreement and interfered through 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 statement said. “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.”
Oregon leaders including Attorney General Ellen Rosenblum and U.S. Sen. Ron Wyden welcomed news of the merger’s failure Tuesday.
“This is great news for grocery shoppers in Oregon who would have faced higher prices at Kroger and Albertsons if this ill-conceived consolidation had gone through,” Wyden said. “I’m glad the court has shelved this monster deal because in addition to raising grocery prices for shoppers already tiptoeing on an economic tightrope, it would have made it that much harder for Oregonians to find a pharmacy and for workers at both supermarket chains to seek fairer wages and better working conditions.”
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