Kroger Files Counterclaim Against Albertsons
The Kroger Co. has fired back at Albertsons' recently filed lawsuit stemming from the failed merger of the two grocery giants, claiming the Boise, Idaho-based company was working with C&S Wholesale Grocers in pursuit of an alternative regulatory strategy.
In a press release from Kroger, the Cincinnati-based grocer alleged that Albertsons and C&S engaged in a “secret and misguided campaign” to pursue its own regulatory strategy, which undermined Kroger’s efforts.
“Albertsons' misconduct shockingly came to light in the middle of the antitrust trials under government cross-examination of Susan Morris, Albertsons' recently promoted CEO designate,” Kroger wrote in its press release. “As a result of its misconduct, Albertsons is not entitled to the $600 million termination fee under the terms of the parties' merger agreement, nor is Albertsons entitled to the other damages it seeks.”
Kroger also alleged that Albertsons executives, including Morris, were working with C&S to supplant and undermine Kroger's regulatory strategy. The misconduct is said by Kroger to include communications between Morris and C&S's CEO and others, utilizing personal emails and cell phones to advance Albertsons' strategy.
“This strategy resulted in C&S criticizing the divestiture package that C&S had voluntarily agreed to, which in turn caused regulators to believe that C&S was an inadequate divestiture buyer,” Kroger said. “The court cited these very communications when it ultimately blocked the merger.”
In response to Kroger’s legal action, Albertsons told Store Brands’ sister publication Progressive Grocer, “Kroger’s weak claims are a deliberate tactic to distract from its own ongoing executive leadership issues; blatant and recurring failures to carry out its contractual obligations under the Merger Agreement; and avoid paying the damages it owes to Albertsons. Albertsons was steadfastly committed to the success of the combination from the outset. By contrast, Kroger did not hold up its end of the bargain, despite its duty under the Merger Agreement to take 'any and all actions' to address regulatory concerns.”
In a statement to Store Brands, C&S Wholesale Grocers said, “C&S worked tirelessly in support of the merger and divestiture, including communicating with both Kroger and Albertsons executives, including Susan Morris. All of C&S’s communications with regulators, Kroger, and Albertsons were completely in line with our contractual, legal, and ethical obligations and were decidedly focused on obtaining the required regulatory approvals.
“Under the parties’ contract, Kroger agreed that if C&S could not acquire the stores Kroger planned to divest after the Kroger-Albertsons merger, Kroger would pay C&S a termination fee in compensation for C&S’s lost opportunities and costs preparing for and supporting the acquisition. Kroger’s failure to live up to its obligation left C&S with no choice but to file its own action, and we look forward to the court enforcing our agreement.”
On December 11, the day after the Kroger/Albertsons merger was blocked by a federal judge, Albertsons filed a multi-billion-dollar lawsuit claiming, among other things, willful breach of contract. In mid-March, C&S Wholesale Grocers filed suit against Kroger, alleging that the grocer refused to pay a $125 million termination fee after the merger was blocked.
Kroger called both lawsuits baseless.
The legal back-and-forth between the three continues a months-long saga that has seen the unexpected resignation of former Kroger CEO Rodney McMullen and the retirement of Albertsons CEO Vivek Sankaran. News of both departures came within hours of each other on March 3.
A permanent successor at Kroger has not yet been named. Morris has been named the successor to Sankaran.
