Albertsons Companies, Inc. announced today that it is officially terminating its $24.6 billion merger agreement with Kroger Co. after a judge blocked the deal in a key ruling. The decision comes after Oregon state court temporarily halted the proposed merger, citing concerns over its potential impact on competition in the grocery industry. In addition, Albertsons filed a lawsuit against Kroger, alleging breach of contract and violation of the covenant of good faith and fair dealing.
“Given the recent court rulings and the significant challenges we have faced in attempting to secure approval for this merger, we have made the difficult decision to terminate the agreement,” said Vivek Sankaran, CEO of Albertsons, in a statement issued Wednesday. “We are deeply disappointed by the courts’ decisions, which we believe fail to recognize the benefits that this merger would have brought to consumers, employees, and the broader economy.”
The merger between Albertsons, based in Boise, Idaho, and Kroger, headquartered in Cincinnati, Ohio, had been in the works for two years. The two companies aimed to combine forces to create the largest grocery chain in the United States, with a combined workforce of around 700,000 employees and more than 5,000 stores across 35 states. Albertsons operates chains such as Safeway, Jewel-Osco, and Shaw’s, while Kroger’s portfolio includes brands like Harris Teeter, Mariano’s, Ralphs, and Smith’s.
The Federal Trade Commission (FTC) had filed a lawsuit earlier this year to block the merger, citing concerns that the deal would reduce competition in the grocery sector, raise prices, and lower wages for workers. On Tuesday, an Oregon court sided with the FTC, agreeing that the merger would likely violate antitrust laws and harm consumers.
The court’s decision marks a major setback for the merger, which had long faced scrutiny over its potential anticompetitive effects. “The Kroger-Albertsons deal always faced an uphill battle, given the scale of the merger and its impact on the essential goods market,” said Neil Saunders, managing director of GlobalData. “The FTC’s intervention underscores the sensitivity of the case, with these two giants dominating large portions of the U.S. grocery market.”
In response to the court’s ruling, Albertsons has filed a lawsuit against Kroger, alleging that the company failed to fulfill its obligations under the merger agreement. According to Albertsons, Kroger did not make the necessary efforts to obtain regulatory approval and neglected to divest assets required for antitrust clearance.
Albertsons claims that Kroger’s refusal to divest assets, disregard for feedback from regulators, and failure to cooperate in securing the deal’s approval led to the termination of the merger. “Kroger failed to act in good faith throughout the merger process and jeopardized the success of the transaction,” an Albertsons spokesperson said in a statement.
In response, Kroger dismissed these allegations, calling them “baseless and without merit.” The company’s spokesperson emphasized that Albertsons had intentionally breached the agreement and interfered throughout the merger process.
The decision to abandon the merger has sent shockwaves through the grocery and retail sectors. Analysts were surprised by Albertsons’ decision to cancel the deal outright, rather than seeking to appeal the court’s ruling or engage in further negotiations. “I am in shock that they chose to take such an aggressive approach,” said Burt Flickinger, an analyst at Strategic Resource Group. “The logical course would have been to take some time to assess the ruling and explore other options, but this lawsuit seems to close the door on that possibility.”
The merger was intended to create a stronger competitor to major retail giants like Walmart, Costco, and Amazon, all of which have aggressively expanded in the grocery market. However, the FTC and state regulators expressed concerns that the merger would lead to higher prices for consumers, fewer choices, and lower wages for workers by eliminating competition.
As part of the merger plan, Kroger and Albertsons had agreed to sell 579 stores in overlapping markets to C&S Wholesale Grocers, a major supplier to independent supermarkets. The FTC, however, argued that the divestiture plan was insufficient and that C&S was ill-equipped to handle the integration of so many stores.
With the merger off the table, both companies will now need to explore alternative strategies to strengthen their positions in an increasingly competitive and challenging retail landscape. For Albertsons, the decision marks the end of a significant chapter in its efforts to compete with larger rivals. For Kroger, the road ahead may involve reassessing its long-term strategy and seeking other avenues for growth.
The legal and financial fallout from this failed merger is likely to have ripple effects across the grocery industry, potentially affecting future mergers, acquisitions, and antitrust regulation in the sector.
Read more: