Albertsons has pulled out of its $25 billion merger with Kroger and is suing the supermarket chain for not doing enough to gain regulatory approval for the deal.
It comes after both a federal and state judge blocked the deal Tuesday, which would have been the largest supermarket merger in U.S. history.
The companies said a merger, originally proposed in 2022, would help them better compete with major retailers like Walmart, Costco and Amazon.
But the deal faced three separate legal challenges, including one filed by the Federal Trade Commission, which argued that if the companies worked together it would reduce competition and increase food prices for consumers.
U.S. District Court Judge Adrienne Nelson issued a preliminary injunction Tuesday blocking the merger after ruling three-week hearing in Portland, Oregon.
An hour later, Judge Marshall Ferguson in Seattle issued a permanent injunction banning the merger in Washington after concluding it would reduce competition in the state and violate consumer protection laws.
On Wednesday, Albertsons said Kroger failed to make “best efforts” and take “all actions” to secure regulatory approval of the proposed merger. AP News.
The company argued that Kroger repeatedly refused to divest assets needed for antitrust clearance, ignoring feedback from regulators, and failed to cooperate with Albertsons.
Albertsons has pulled out of its $25 billion merger with Kroger and is suing the supermarket chain for not doing enough to gain regulatory approval for the deal
“Kroger’s selfish behavior, at the expense of Albertsons and the agreed transaction, has harmed Albertsons shareholders, employees and consumers,” Tom Moriarty, general counsel for Albertsons, said in a statement.
Kroger said it disagrees with Albertsons “in the strongest possible terms.”
On Wednesday, it said Albertsons was responsible for “repeated willful material breaches and interference during the merger process.”
Shares of Albertsons rose more than 2 percent at the opening bell as investors reacted to the news, while shares of Kroger rose slightly.
Both supermarket chains have spent hundreds of millions of dollars over the past two years on the deal, which would create a $200 billion company with 5,000 supermarkets across the country. The New York Times reported.
A customer picks up bacon at a Safeway supermarket, a subsidiary of Albertsons, in Washington, D.C., in October 2022
Federal and state judges on Tuesday blocked the merger deal between Albertsons and Kroger, which would have been the largest supermarket merger in U.S. history
The two chains compete in 22 states, but have significant overlap in some markets, including Los Angeles, Seattle and Chicago.
Under the merger agreement, the companies had taken steps to address regulators’ concerns about market concentration.
Albertsons and Kroger agreed to sell 579 stores in places where their locations overlapped with C&S Wholesale Grocers, a New Hampshire-based supplier to independent grocery stores that also owns the Grand Union and Piggly Wiggly store brands.
However, regulators were still skeptical that these retail sales would alleviate concerns about competition and possible price increases for Americans.