Kroger Files Counterclaims Against Albertsons
In the wake of the two grocery companies’ failed $24.6 billion merger, The Kroger Co. has filed a legal response to the Albertsons Cos. earlier lawsuit against it. Kroger is claiming that while it was working to seek regulatory approval and close the merger, Albertsons was engaging in a secret campaign alongside C&S Wholesale Grocers to pursue its own regulatory strategy, which ultimately undermined Kroger's efforts.
Kroger says that as a result of its misconduct, Albertsons is not entitled to the $600 million termination fee under the terms of the parties' merger agreement, nor is Albertsons entitled to other damages it is seeking. The alleged misconduct included incoming Albertsons CEO Susan Morris’ “secret communications with C&S's CEO and others, utilizing personal emails and cell phones to advance Albertsons's strategy.”
With these counterclaims, Kroger is seeking damages from Albertsons as a result of its misconduct and breaches of the merger agreement. Kroger says it will seek to recover the investment it made to obtain regulatory approval for the merger while Albertsons was working to undermine it.
In a media statement regarding the countersuit, an Albertsons spokesperson said: "Kroger’s weak claims are a deliberate tactic to distract from its own ongoing executive leadership issues; blatant and recurring failures to carry out its contractual obligations under the Merger Agreement; and avoid paying the damages it owes to Albertsons. Albertsons was steadfastly committed to the success of the combination from the outset. By contrast, Kroger did not hold up its end of the bargain, despite its duty under the Merger Agreement to take 'any and all actions' to address regulatory concerns.
"As highlighted by multiple judges in the decisions blocking the merger, Kroger – under the leadership of former CEO Rodney McMullen – acted in its own financial self-interest, proposing insufficient divestiture packages that repeatedly ignored regulators’ concerns, mismanaging the process of identifying a divestiture buyer, and failing to cooperate with Albertsons," the spokesperson continued. "Kroger’s self-interested conduct doomed the merger, and we are now focused on returning value to Albertsons’ shareholders to compensate for those losses. We look forward to presenting our case in court.”
In its December lawsuit, Albertsons claimed that Kroger made a willful breach of contract and breach of the covenant of good faith and fair dealing since the company failed to exercise “best efforts” and to take “any and all actions” to secure regulatory approval of the companies’ agreed merger transaction.
Albertsons asserted that Kroger willfully breached the companies’ merger agreement by refusing to divest the necessary assets for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers and failing to cooperate with Albertsons.
Kroger had refuted Albertsons’ claims, which it asserted were “baseless and without merit.”
Earlier this month, C&S Wholesale Grocers filed its own claim that Kroger should pay a $125 million termination fee. C&S had a major stake in the deal, planning to pick up nearly 600 Kroger and Albertsons stores, distribution centers and other assets as part of a divestiture plan.
Per The Wall Street Journal report, C&S argued that Kroger needs to meet the terms of an agreement. "Kroger failed to identify any reason for its refusal to pay the termination fee it owed C&S — because there is none," C&S asserted in a legal filing.
In an email to Progressive Grocer, Kroger maintains that it doesn’t owe the fee. "It is disappointing that C&S has decided to file a baseless lawsuit when it is clear that C&S forfeited its right to a termination fee and has no reasonable claim to any damages. Kroger will vigorously defend itself," a company representative wrote.
C&S was also named in the Albertsons case filed this past December. In its complaint, Albertsons contended that the initial divestiture package was deficient and didn’t take into account C&S’ feedback.
Cincinnati-based Kroger serves more than 11 million customers daily through a digital shopping experience and retail food stores under a variety of banner names. The grocer is No. 4 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America. PG also named Kroger one of its Retailers of the Century.
Keene, N.H.-based C&S is the largest grocery wholesale distributor in the United States, and the eighth-largest privately owned company. C&S also operates and supports corporate grocery stores and services independent franchisees under a chain-style model throughout the Midwest, South and Northeast. The company is No. 18 on The PG 100. As of Nov. 30, 2024, Albertsons Cos. operated 2,273 retail food and drug stores with 1,732 pharmacies, 405 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. The Boise, Idaho-based company operates stores across 34 states and the District of Columbia under more than 20 well-known banners. Albertsons is No. 9 on PG’s 2024 list and is also named to PG's Retailers of the Century.
