Albertsons gives up on Kroger merger and sues the grocery chain for failing to secure deal

By DEE-ANN DURBIN

Albertsons is giving up on its merger with Kroger and it is suing the grocery chain, saying it didn’t do enough to secure regulatory approval for the $24.6 billion agreement.

The move came the day after two judges halted the merger in separate court cases. U.S. District Court Judge Adrienne Nelson issued a preliminary injunction blocking the merger Tuesday after holding a three-week hearing in Portland, Ore. An hour later, Judge Marshall Ferguson in Seattle issued a permanent injunction barring the merger in Washington after concluding it would lessen competition in the state and violate consumer-protection laws.

A ruling in a Colorado case challenging the merger is expected soon. Colorado Attorney General Phil Weiser said Wednesday that he expects the decision in the lawsuit filed by his office to align with the other two decisions.

As part of the lawsuit, Denver District Judge Andrew J. Luxen is also considering the claim that Kroger and Albertsons entered into illegal agreements during a 2022 strike against the Kroger-owned King Sooper stores in Colorado. The state is seeking a $1 million penalty from each grocery chain for an alleged deal in which Albertsons agreed not to hire King Soopers employees or solicit its rival’s pharmacy customers doing the strike.

The two companies have denied the claims.

Kroger and Albertsons in 2022 proposed what would be the largest grocery store merger in U.S. history. The companies said a merger would help them better compete with big retailers like Walmart, Costco and Amazon.

Under the merger agreement, Kroger and Albertsons — who compete in 22 states — agreed to sell 579 stores in places where their locations overlap to C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly store brands.

But the Federal Trade Commission sued to block the merger earlier this year, saying it would raise prices and lower workers’ wages by eliminating competition. It also said the divestiture plan was inadequate and that C&S was ill-equipped to take on so many stores.

On Wednesday, Albertsons said that Kroger failed to exercise “best efforts” and to take “any and all actions” to secure regulatory approval of the companies’ agreed merger transaction.

Albertsons said Kroger refused to divest the assets necessary for antitrust approval, ignored regulators’ feedback and rejected stronger divestiture buyers.

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.

The state of Colorado and the United Food and Commercial Workers Union, which opposed the consolidation, made similar arguments against the divestiture plan. They said C&S doesn’t have the resources or experience to compete with Kroger after a merger and as a result, stores would likely close.

“Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons’ shareholders, associates and consumers,” said Tom Moriarty, Albertsons’ general counsel, in a statement.

Kroger said that it disagrees with Albertsons “in the strongest possible terms.” It said early Wednesday that Albertsons was responsible for “repeated intentional material breaches and interference throughout the merger process.”

Weiser called the two court rulings against the merger good for consumers, workers and local suppliers. His office filed a lawsuit in February after hearing from hundreds of people in 19 town halls across Colorado.

“This merger would raise prices, lower choice, hurt customer service, hurt access to local food,” Weiser said. “This is a great day for consumers. This shows what happens when consumers speak up.”

Shares of Albertsons rose more than 2% at the opening bell, while Kroger’s stock rose slightly.

Denver Post reporter Judith Kohler contributed to this report.