Albertsons calls off merger and sues Kroger

By Nathaniel Meyersohn, CNN

New York (CNN) — The largest proposed merger in US supermarket history has collapsed.

Grocery chain Albertsons called off its $25 billion merger with Kroger Wednesday, a day after a federal judge blocked the deal.

The merger, announced in 2022, sought to combine the fifth and tenth largest retailers in the country. The companies own dozens of grocery chains, including Safeway, Vons, Harris Teeter and Fred Meyer.

“We have made the difficult decision to terminate the merger agreement,” Albertsons CEO Vivek Sankaran said in a statement Wednesday.

Albertsons also sued Kroger for breach of its contract agreement, alleging Kroger caused the merger to be blocked. Albertsons said that Kroger failed to exercise its “best efforts” and to take “any and all actions” to secure regulatory approval of the merger.

Kroger said Albertsons’ claims were “baseless and without merit” a deflection of Albertson’s own “multiple breaches,” and an attempt to receive a break-up fee “to which they are not entitled.” Kroger added that it went to “extraordinary lengths” to advance the merger.

Supermarkets have been losing ground in recent decades to competition, and Kroger and Albertsons wanted to merge to better fight off Walmart and Amazon. Kroger and Albertsons also employ mostly unionized workforces and said they wanted to merge to be more competitive against non-union giants.

But in her ruling, federal judge Adrienne Nelson in Oregon said that supermarkets are “distinct from other grocery retailers” and are not direct competitors to Walmart, Amazon and other companies that sell a wider range of goods. The merger would eliminate head-to-head competition between Albertsons and Kroger, potentially raising prices for consumers, she said in the ruling.

And the deal ran into stiff opposition from a coalition of unions, small grocery stores and political leaders from both parties wary of corporate consolidation. The Federal Trade Commission sued to block the merger, and the collapse of the deal is a victory for outgoing FTC chair Lina Khan. Khan has been a skeptic of big mergers and acquisitions, arguing they often harm consumers.

Although Kroger and Albertsons said their combined scale would allow them to lower prices for consumers, opponents argued that the merger would lead to higher prices.

Investors appeared to expect the deal would fall through: Both Kroger’s and Albertsons’ stocks gained Wednesday. Albertsons helped drive up its stock by announcing Wednesday it would buy back up to $2 billion worth of shares.

Albertsons also said it would continue investing in improving its stores, technology and employees.

Analysts say Kroger is in a stronger position than Albertsons because of its size. Kroger is the largest grocery chain in America.

Kroger CEO Rodney McMullen said last week that the company was well positioned to grow even if the deal ended.

“We’ve always made sure that we don’t need to do mergers to make our business successful,” he said. “If it doesn’t happen, we’ll continue to go on.”

This story has been updated with additional reporting and context.

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