A day after two judges in two lawsuits ruled against the proposed $24.6 billion supermarket merger, Albertsons Companies said Wednesday it would end its merger agreement with Kroger.
“Given the recent federal and state court decisions to block our proposed merger with Kroger, we have made the difficult decision to terminate the merger agreement. We are deeply disappointed in the courts’ decisions,” Albertsons CEO Vivek Sankaran said.
At the same time, the Idaho grocery chain, which owns 105 Safeway and Albertsons grocery stores in Colorado, said it filed a lawsuit against Kroger for breach of merger agreement accusing the larger supermarket chain “repeatedly refusing to divest assets necessary for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers,” the company said in a statement.
As part of the merger proposal, if the deal failed to go through, Kroger must pay “an immediate $600 million termination fee” to Albertsons, the company said. The company is also seeking billions of dollars in damages from Kroger as it seeks to regain value for shareholders.
Kroger operates 118 King Soopers and 32 City Market stores in Colorado. The company called Albertsons’ claims “baseless and without merit” and looks forward to another day in court, said a Kroger spokesperson.
“Kroger refutes these allegations in the strongest possible terms, especially in light of Albertsons’ repeated intentional material breaches and interference throughout 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 company said.
On Tuesday, a federal judge in Oregon overseeing the Federal Trade Commission antitrust case issued a preliminary injunction to give federal regulators additional time to consider implications of the merger. That temporarily halted the merger from moving forward. A judge in a second lawsuit in the state of Washington issued a permanent injunction later that day.
Colorado’s trial opposing merger
Colorado already had a preliminary injunction to block the merger in the state. Attorney General Phil Weiser had sued the companies in February alleging that the two grocery chains already demonstrated anticompetitive behavior during the King Soopers worker strike in January 2022, when management discussed not poaching striking workers or marketing to King Soopers pharmacy customers who were trying to avoid crossing the picket line.
The nearly four-week hearing in Denver district court wrapped up in late October where Colorado attorneys making their case why a merger reduces competition and would harm consumers, employees, farmers and local suppliers. They also shared evidence that Kroger raised prices in mountain towns where there was little grocery competition.
Attorneys for Kroger pushed back on allegations of anticompetitive behavior and said its prices, which are 10% lower than Albertsons, are better for consumers. The chain planned to invest $40 million in the Colorado stores it acquired from Albertsons to lower prices and update those stores, as well. And grocery stores no longer compete just against other local grocery stores, but companies like Walmart, Amazon and Costco, supermarket attorneys had argued.
The Colorado case is pending a decision by Denver District Court Judge Andrew J. Luxen, who said that if a decision came down from the FTC or Washington state, he would hold a conference with all the sides. He did not say when he would rule on the case.
Where Colorado’s case stands
In a news conference Wednesday, Weiser said his office has not heard from the court and continues to wait for the judge’s decision. But even though Albertsons called off the merger, it’s not final. Kroger hasn’t agreed and has challenged the decision in the FTC case.
“We still expect the court to engage in its work and to rule,” Weiser said. “If the parties want to make a showing that somehow this merger is completely dead, that is their burden to make. But unless the judge concludes that, this merger challenge is still alive in the Colorado courts and, for that matter, in other courts insofar as the case could still be appealed.”
But Weiser, who said he brought the case to court after a 19-city listening tour to hear concerns of locals, said he has a good feeling about Colorado’s case.
“I think we can say that the statements Albertsons is making are supportive of our case and we can say for sure that the two rulings are very supportive of our case,” he said. “I do not believe this merger is going to happen.”
The Denver judge still must weigh in on the AG’s lawsuit alleging King Soopers and Albertsons managers had a no-poach and no-solicitation agreement.
“Competition is the American way,” Weiser said. “That’s why we have antitrust laws.”
Nationwide, the union would increase Kroger’s size to nearly 5,000 grocery stores in all but two states. To meet regulator approval, Kroger planned to divest 579 stores to C&S Wholesale Grocer in New Hampshire. C&S aimed to build a new retail business.
In Colorado, Kroger planned to continue operating its 150 King Soopers and City Market stores, and acquire 14 Safeways from Albertsons. Kroger proposed selling the remaining 103 Safeways and two Albertsons stores in Colorado to C&S.