Albertsons has formally called off its $25bn merger with Kroger and sued its fellow US grocer over the failed deal.
The legal action comes after two US courts blocked the transaction due to competition concerns.
Albertsons claims Kroger violated the merger agreement between the two companies by not exerting “best efforts” and failing to take “any and all actions” to secure regulatory approval for the deal.
The retailer accused Kroger of “willfully” breaching the merger agreement by “repeatedly refusing to divest assets necessary for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers and failing to cooperate with Albertsons”.
Kroger, however, dismissed the allegations as “baseless and without merit.”
The retailers are also disputing which of the companies should bear the legal fees and whether a breakup fee is applicable.
In a statement, a Kroger spokesperson said: “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.”
Albertsons claims it is owed a $600m termination fee and compensation for the resources spent on the merger.
Kroger has countered the claims and said it will be “responding to these baseless claims in court.”
The planned deal, announced in 2022, was set to create the second-largest food retailer in the US, with combined sales exceeding $200bn.
Kroger and Albertsons had argued the merger would make the enlarged business more competitive in the face of rivals such as Walmart, Costco and Amazon.
However, the Federal Trade Commission (FTC) filed a lawsuit in February to block the deal, citing concerns that the merger would lead to higher grocery prices and affect employee terms.
Neil Saunders, a retail analyst at GlobalData, Just Food‘s parent, said: “Kroger will now need to double down on its efforts to invest in its core business – something it has been struggling with of late."
He added Albertsons, as a smaller player, “needs to set out how it intends to grow and scale as it perhaps waits to find another buyer”.
Alongside the announcement of its move to sue Kroger, Albertsons revealed plans to raise its quarterly cash dividend by 25%, increasing it from $0.12 to $0.15 per share.
Additionally, the company is pushing ahead with a share repurchase programme of up to $2bn, inclusive of existing authorisation.
