Albertsons called off the merger and sued Kroger

New York
CNN
—

The largest proposed merger in US supermarket history has collapsed.

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

The merger, announced in 2022, was intended to combine the fifth and tenth largest retailers in the country. The company owns dozens of grocery chains, including Safeway, Vons, Harris Teeter and Fred Meyer.

“We have taken the difficult decision to terminate the merger agreement,” Albertsons CEO Vivek Sankaran said Wednesday.

Albertsons also sued Kroger for breach of its contractual agreement, alleging that Kroger blocked the merger. Albertsons said Kroger failed to use its “best efforts” and take “any action” to secure approval of the merger.

Kroger said Albertson’s claims were “baseless and without merit” for Albertson’s “various violations” of diversion and breach fees that “are not entitled to.” Kroger added that it had taken “extraordinary measures” to move the merger forward.

Supermarkets have been losing ground to competition for decades, and Kroger and Albertsons wanted to merge to better fight Walmart and Amazon. Kroger and Albertsons also use mostly unionized workers and said they wanted to merge to be more competitive against the non-unionized giants.

But in her ruling, Oregon federal judge Adrienne Nelson said supermarkets are “distinguished from other grocers” and are not direct competitors to Walmart, Amazon and other companies that sell a wider range of products. A merger would eliminate competition between Albertsons and Kroger, which could raise prices for consumers, the ruling said.

And the deal faced fierce opposition from unions, small grocers and a coalition of political leaders from both parties, wary of corporate consolidation. The Federal Trade Commission sued to block the merger, and the deal’s collapse is a victory for FTC Chairwoman Lina Khan. Khan has been skeptical of large mergers and acquisitions, arguing that they often hurt consumers.

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

Investors expected the deal to fall through: Shares of Kroger and Albertsons gained on Wednesday. Albertsons helped fuel its stock rally by announcing a $2 billion stock buyback on Wednesday.

He also said Albertsons will continue to invest in improving its stores, technology and employees.

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

Kroger CEO Rodney McMullen said last week that the company well located despite the termination of the growth agreement.

“We’ve always made sure that we don’t have to do a merger to make our business successful,” he said. “If that doesn’t happen, we will continue.”

This story has been updated with additional reporting and context.