Albertsons terminated its $25 billion (€23.82 billion) bid to merge with Kroger on Wednesday after courts blocked the deal and sued its rival, alleging a breach of contract that led to the deal's demise.
The formal termination ends a two-year effort by the chains to combine that regulators argued would lead to higher prices for shoppers.
Albertsons said it was suing due to Kroger's failure to take 'any and all actions' to get the deal approved.
"Given the recent federal and state court decisions to block our proposed merger with Kroger, we have made the difficult decision to terminate the merger agreement," Albertsons CEO Vivek Sankaran said.
Termination Fee
Albertsons is seeking billions of dollars in damages along with a $600 million (€571.64 billion) termination fee.
Kroger called the claims baseless in a statement and said it will defend against them in court.
"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," a Kroger spokesperson said.
Albertsons operates around 2,300 stores and had alluded to the possibility of store closures and layoffs if the deal was blocked.
However, the company sounded a positive note on Wednesday, touting recent investments in new technology.
Eliminate Competition
Two different courts blocked the deal on Tuesday, siding with federal and state antitrust regulators who moved to stop the deal by arguing that the merger would eliminate competition between the traditional grocery chains, causing higher prices and reducing leverage for unionised workers.
A combined Kroger and Albertsons would have had the second biggest share in the U.S grocery industry with about 11% based on 2023 industry market share information from GlobalData.
Walmart would have continued to hold the top spot with about 17% of the market.
"Walmart, Costco and other grocery giants are the clear winners in this scenario," said Blake Droesch, analyst with eMarketer.
"The merger would have created a formidable grocery competitor to Walmart. But without the merger, Walmart remains in a league of its own."
Regulatory Opposition
The deal became a symbol of surging grocery costs and faced fierce regulatory opposition.
U.S. food prices have risen by 25% over the last four years, and while food inflation is showing signs of cooling in 2024, grocery bills remain a concern for shoppers.
The U.S. Federal Trade Commission sued along with attorneys general from eight states and the District of Columbia.
Washington state sued on its own to block the deal.
In both of those cases, judges ruled on Tuesday that the deal would unlawfully decrease competition. Colorado had also sued to block the deal.
