Kroger Facing New Lawsuit Related To Failed Merger
The fallout from the failed Kroger/Albertsons merger continues.
C&S Wholesale Grocers has filed suit against Kroger alleging that the grocer refused to pay a $125 million termination fee after a federal court judge in December blocked the merger. News of the lawsuit was first reported by the Wall Street Journal.
C&S was a key component of the merger proposal as it agreed to purchase 579 stores that included a mix of Kroger-owned and Albertsons-owned locations across 18 states. The food distributor also agreed to purchase several distribution centers and five private label brands.
In the suit filed in Delaware state court, C&S claims that Kroger failed to identify any reason for its refusal to pay the termination fee owed to the company.
A Kroger spokesperson told The Journal the lawsuit is baseless and C&S forfeited its right to the fee. However, the spokesperson did not offer specifics related to its claim that C&S forfeited the payment.
The divestiture of nearly 600 stores and other assets to C&S was done in response to the Federal Trade Commission’s opposition to the proposed merger. In December, a U.S. District Court judge ruled against the merger saying the defendants engage in substantial head-to-head competition and the proposed merger would remove that competition.
The C&S Wholesale Grocers legal action is the second lawsuit filed against Kroger following the failed merger. A day after the proposed merger was rejected in court, Albertsons filed a multi-billion dollar lawsuit claiming, among other things, willful breach of contract.
Albertsons said Kroger “willfully breached the merger agreement in several key ways, including by repeatedly refusing to divest assets necessary for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers, and failing to cooperate with Albertsons.”
Similar to the C&S lawsuit, a Kroger spokesperson called claims in the Albertsons lawsuit “baseless and without merit.”
In addition to the lawsuits it now faces, Kroger is also on the hunt for a new chief executive following the resignation of Rodney McMullen in early March. McMullen left the company following an investigation into his “personal conduct” by the company’s board of directors.
Kroger issued a statement that did not offer details of the investigation, but noted the conduct in question, while unrelated to the business, was inconsistent with the company’s Policy on Business Ethics. Ronald Sargent is now serving as chairman and interim CEO.
