Albertsons Takes Kroger To Court After Merger Hits Regulatory Roadblock: Retail’s Bullish

Albertsons Companies Inc. ($ACI) is suing grocery store operator Kroger ($KR) after their $25 billion merger was terminated by the former, after having hit a regulatory roadblock, with retail sentiment staying bullish.

On Wednesday, Albertsons took Kroger to court, accusing it of "willful breach of contract" and fair dealing arising from its alleged failure to exercise its “best efforts” to secure regulatory approval of the companies’ agreed merger transaction, according to a company statement.

Albertsons is now seeking damages of more than $600 million in deal termination fees.

Albertsons' General Counsel and Chief Policy Officer Tom Moriarty, said, "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 has refuted the allegations calling them "baseless" and claiming it went to "extraordinary lengths to uphold the merger agreement throughout the entirety of the regulatory process, and the facts will make that abundantly clear."

Kroger counter-argued that Albertsons had intentional material breaches and interfered throughout the merger process which it plans to now prove in court.

"This is clearly an attempt to deflect responsibility following Kroger's written notification of Albertsons' multiple breaches of the agreement and to seek payment of the merger's break fee, to which they are not entitled," Kroger said in a statement.

Retail sentiment on the two stocks was optimistic with message volumes inching up to extremely high.
 

KR sentiment meter and message volumes on Dec 11 as of 2:00 pm ET

 

ACI sentiment meter and message volumes on Dec 11 as of 2:00 pm ET

Albertsons' formal termination of the $25 billion merger with Kroger ended after regulators blocked the deal, arguing it would lead to higher prices.

Vivek Sankaran, CEO of Albertsons, said, “Given the recent federal and state court decisions to block our proposed merger with Kroger, we have made the difficult decision to terminate the merger agreement. We are deeply disappointed in the court’s decisions.”

Kroger stock was slightly up on Wednesday afternoon while Albertsons' was trading down 0.5%. 

Kroger stock is up 32.2% year-to-date; Albertsons stock is down 19% year-to-date.