Albertsons Cos. Inc. has filed a lawsuit against The Kroger Co., bringing claims for willful breach of contract and breach of the covenant of good faith and fair dealing.
The legal action, filed in the Delaware Court of Chancery, follows a U.S. district court ruling Dec. 11 blocking a proposed merger deal between the two companies.
In a Wednesday news release announcing the lawsuit and its decision to terminate the agreement, Albertsons said the claims stem from Kroger’s “failure to exercise ‘best efforts’ and to take ‘any and all actions’ to secure regulatory approval of the companies’ agreed merger transaction, as was required of Kroger under the terms of the merger agreement between the parties.”
The Boise, Idaho-based company accuses Kroger of willfully breached the agreement by repeatedly refusing to divest assets necessary for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers and failing to cooperate with Albertsons, according to the release.
Kroger has denied the allegations, calling the claims "baseless and without merit" in a statement responding to the lawsuit.
"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," Kroger said in the statement.
“A successful merger between Albertsons and Kroger would have delivered meaningful benefits for America's consumers, Kroger’s and Albertsons’ associates and communities across the country,” said Tom Moriarty, Albertsons’ general counsel and chief policy officer. “Rather than fulfill its contractual obligations to ensure that the merger succeeded, Kroger acted in its own financial self-interest, repeatedly providing insufficient divestiture proposals that ignored regulators’ concerns.”
Moriarty said Kroger’s conduct has harmed Albertsons’ shareholders, associates and consumers, adding that “the opportunity to realize the significant benefits of the merger has been lost on account of Kroger’s willfully deficient approach to securing regulatory clearance.”
“We are taking this action to enforce and preserve Albertsons’ rights and to protect the interests of our shareholders, associates and consumers,” Moriarty said.
Albertsons said recent rulings from the U.S. District Court for the District of Oregon and the King County Superior Court in Washington state, which granted regulators’ requests to block the merger, could have been avoided but for Kroger’s alleged breaching conduct.
Pursuant to the Delaware Court of Chancery rules, Albertsons’ complaint against Kroger is temporarily under seal, according to the release.
Albertsons said it is seeking billions of dollars in damages from Kroger, claiming that its shareholders have been denied a multibillion-dollar premium that Kroger agreed to pay for Albertsons’ shares and have been subjected to a decrease in shareholder value on account of Albertsons’ inability to pursue other business opportunities as it sought approval for the transaction.
The company is also seeking to recover for the time, energy and resources it invested in pursuing a successful merger, the release said.
Albertsons said it has notified Kroger of its decision to terminate the merger agreement “in light of the Oregon and Washington courts’ rulings enjoining the company’s proposed merger with Kroger and Kroger’s failure to close the merger before the contractual deadline to do so.” The company said the move entitles Albertsons to an immediate $600 million termination fee and removes contractual constraints on its ability to pursue other strategic opportunities.
In addition to the termination fee, Albertsons said it is entitled to relief “reflecting the multiple years and hundreds of millions of dollars it devoted to obtaining approval for the merger, along with the extended period of unnecessary limbo Albertsons endured as a result of Kroger’s actions.” The company said it further seeks to recover certain expenses and costs.
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In a Wednesday news release announcing the lawsuit, Albertsons said the claims stem from Kroger’s “failure to exercise ‘best efforts’ and to take ‘any and all actions’ to secure regulatory approval of the companies’ agreed merger transaction, as was required of Kroger under the terms of the merger agreement between the parties.”
(Photos, from top: billtster, Adobe Stock; JHVEPhoto, Adobe Stock)
(Photos, from top: billtster, Adobe Stock; JHVEPhoto, Adobe Stock)
by The Packer Staff, Dec 11, 2024