Kroger Co (NYSE:KR) and Albertsons Companies Inc (NYSE:ACI) will remain competitors after a U.S. judge blocked the companies’ proposed merger. It didn’t take long for them to start acting like it again.
What Happened: Albertsons announced the termination of its proposed merger with Kroger and filed a lawsuit against the grocery giant, accusing Kroger of violating the contractual obligations of the merger agreement by failing to do all it could to secure regulatory approval.
“Rather than fulfill its contractual obligations to ensure that the merger succeeded, Kroger acted in its own financial self-interest, repeatedly providing insufficient divestiture proposals that ignored regulators’ concerns. 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, general counsel and chief policy officer of Albertsons.
On Tuesday, U.S. District Judge Adrienne Nelson blocked the proposed merger of the two companies after finding the deal would impact competition in the grocery space. Attorneys for both companies previously said the deal would most likely be squashed if the judge ruled in favor of the U.S. Federal Trade Commission.
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Albertsons alleges Kroger failed to exercise “best efforts” and failed to take “any and all actions” to make sure the merger was approved as required of the company under terms of the merger agreement. Albertsons also alleges Kroger breached the merger agreement by “repeatedly refusing” to divest necessary assets for antitrust approval, ignoring regulators’ feedback and failing to cooperate with Albertsons.
Kroger responded to the accusations Wednesday morning, calling the lawsuit “baseless and without merit.”
“Kroger refutes these allegations in the strongest possible terms, especially in light of Albertsons’ repeated intentional material breaches and interference throughout the merger process, which we will prove in court,” the company said.
“We went to extraordinary lengths to uphold the merger agreement throughout the entirety of the regulatory process and the facts will make that abundantly clear.”
Albertsons is seeking billions of dollars in damages from Kroger, alleging shareholders were unfairly denied a multi-billion-dollar premium that Kroger agreed to pay for Albertsons shares.
Albertsons also believes it’s entitled to a $600 million termination fee. Kroger challenged the allegation in its statement and said the company looks forward to responding in court.
KR, ACI Price Action: At the time of publication, Kroger shares were up 0.58% at $61.08 while Albertsons shares were down 0.38% at $18.44, according to Benzinga Pro.
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