Albertsons has filed a lawsuit against Kroger just a day after a federal judge blocked a proposed $24.6 billion merger of the companies, which would have combined the two largest supermarket chains in the U.S., The Wall Street Journal reported Dec. 11.
The lawsuit, filed in a Delaware chancery court, accuses Kroger of failing to fulfill its contractual obligations to ensure the merger's approval and of acting in its own financial interest, ultimately causing the deal to collapse.
In the filing, Albertsons claims Kroger provided insufficient divesture proposals to regulators and disregarded antitrust concerns raised by the Federal Trade Commission. Albertsons is now seeking billions in damages.
Kroger, in its response, labeled Albertsons' claims as baseless, asserting that the lawsuit was an attempt by Albertsons to deflect responsibility for the deal's failure, according to the Journal report. Kroger maintains that Albertsons repeatedly breached the merger agreement and that the lawsuit seeks to secure the breakup fee despite Albertsons not being entitled to it under the terms of their agreement.
The lawsuit follows a significant legal development just a day earlier, when U.S. District Judge Adrienne Nelson ruled to block the merger, siding with the FTC's argument that combining Kroger and Albertsons would stifle competition in the U.S. grocery market, according to a Dec. 10 Bloomberg report.
The court found that the proposed divesture of 579 stores to C&S Wholesale Grocers, intended to address antitrust concerns, would not be enough to preserve competition. The judge emphasized that the structure of the deal could lead to store closures or reduced sales.
The divestiture was set to include 579 stores across 18 states, which Kroger and Albertsons had planned to sell to Keene, N.H.-based C&S Wholesale Grocers for $2.9 billion.
While the companies had pledged to maintain pharmacy and healthcare services under C&S' ownership, the FTC and the court argued that C&S, with fewer than 30 stores in operation, would not have the scale or capability to effectively compete with the enlarged Kroger-Albertsons entity.
Albertsons' lawsuit comes after months of uncertainty surrounding the proposed merger. Initially announced in October 2022, the deal was intended to create a larger competitor to retail giants such as Walmart and Amazon. However, it faced significant antitrust scrutiny from regulators who argued that the combined company would dominate the grocery sector.