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Albertsons (ACI-1.37%) has filed a lawsuit against Kroger (KR-1.63%), accusing the grocery giant of failing to uphold its contractual obligations during their planned $24.6 billion merger, prompting Albertsons to back out of the deal.
The lawsuit, filed on Wednesday in Delaware’s Court of Chancery, claims Kroger failed to make the “best efforts” required by their merger agreement to secure regulatory approval – an issue that became even more pressing after the deal was blocked just a day prior.
“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,” said Tom Moriarty, Albertsons’ general counsel and chief policy officer, in a statement.
Albertsons’ asserts that Kroger’s “self serving conduct,” including its failure to divest necessary assets, disregard of regulatory feedback, and rejection of viable buyers, ultimately led to the merger’s collapse.
“Kroger’s actions harmed not only Albertsons’ shareholders but also consumers and employees,” Moriarty continued. “Rather than acting in good faith, Kroger pursued its own financial interests.”
Albertsons points to Judge Marshall’s ruling on Tuesday, which further supports its claims, suggesting that the merger collapse could have been “avoided” had Kroger adhered to the agreement.
Albertsons is seeking “billions of dollars in damages from Kroger to make Albertsons and its shareholders whole.” Additionally, the company is entitled to a $600 million termination fee and is requesting compensation that reflects “multiple years and hundreds of million of dollars” devoted to securing the deal.
However, Kroger strongly rejects Alberstons’ claims. A spokesperson from the company said in an email to Quartz, “Alberstons’ claims are baseless and without merit.” Kroger argues that the lawsuit is a deflection of responsibility following Kroger’s written notification of Albertsons’ breaches of the agreement.
This legal battle between the grocery giants comes on the heels of ruling from courts in Oregon and Washington, which sided with regulators in blocking the merger over antitrust concerns. These concerns highlighted potential harms to market competition and consumer choice.
With over 2,260 stores, Albertsons, which is now seeking to hold Kroger accountable for what it calls a willful breach of contract. Had the deal gone through, Kroger’s footprint would have expanded to 5,000 stores. As the case moves forwards, it remains to be seen whether Albertsons can secure the damages it seeks – and whether it will be able to finally move on from the failed deal.