After spending nearly $1.5 billion on legal fees on their attempted (but failed) merger, Kroger and Albertsons are again ramping up their legal bills – but this time the targets are each other.
Additionally, during the last month, C&S Wholesaler Grocers, which was slated to acquire 579 divested stores, also entered the fray by suing Kroger for not paying a $125 million termination fee after the deal collapsed.
The post-merger legal circus actually began on December 11, a day after U.S. District Judge Adrienne Nelson blocked the $24.6 billion deal for what would have been the largest merger in supermarket history. That conclusion came nearly 27 months after the potential union was first announced.
In that December suit, Albertsons claimed that Kroger had “willfully breached” its contract, accusing the Cincinnati-based chain of failing to use its “best efforts” to secure regulatory approval of the deal. The Boise-based chain specifically noted that Kroger “repeatedly refused to divest assets necessary for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers and failing to cooperate with Albertsons.”
In essence, Albertsons said that Kroger suffered from “buyer’s remorse.”
Technically, Albertsons terminated the merger after Judge Nelson’s decision, which entitles Albertsons to an immediate $600 million termination fee (as stated in the original agreement) and removes contractual constraints on Albertsons’ ability to pursue other strategic opportunities.
In addition to the $600 million termination fee, Albertsons claimed it is entitled to relief “reflecting the multiple years and hundreds of millions of dollars it devoted to obtaining approval for the merger, along with the extended period of unnecessary limbo Albertsons endured as a result of Kroger’s actions. Albertsons further seeks to recover certain expenses and costs.”
Kroger responded quickly, noting it “…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 claimed. “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.”
In early March, Albertsons amended its suit, adding that Kroger, as the prime mover behind the deal, should have prioritized gaining antitrust clearance ahead of the two-year original completion schedule, instead of relying on extensions which created further delays.
