Kroger brings counterclaims against Albertsons

Kroger says it has filed its answers and counterclaims to a lawsuit filed in December by Albertsons, which claims a breach of the companies' proposed merger agreement after a U.S. court blocked the $25 billion deal.

In a news release, Kroger alleges that while it worked to seek regulatory approval and close the merger, Albertsons was engaged in a "secret and misguided campaign, together with C&S Wholesale Grocers, the divestiture buyer, to pursue its own regulatory strategy," which undermined its efforts.

“Albertsons's misconduct shockingly came to light in the middle of the antitrust trials under government cross-examination of Susan Morris, Albertsons's recently promoted CEO designate,” Kroger said in the 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 claims that Albertsons executives secretly worked with C&S Wholesale Grocers to undermine its regulatory strategy, including Morris having "secret communications with C&S’s CEO and others, utilizing personal emails and cell phones" to advance the 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’s response said. “The Washington court cited these very communications when it ultimately blocked the merger.”

Kroger also alleges that Albertsons developed a “Plan B” to sue the retailer in the event of a failed merger, "by manufacturing a paper trail over many months including unfounded allegations by Albertsons that are directly contrary to the under-oath testimony" of Albertsons executives.

“Kroger was prepared, in the event of adverse court decisions, to pursue all remaining options to close the merger,” the retailer said in its statement. “But, within hours of the court decisions blocking the merger, Albertsons terminated the merger agreement and filed a 140-page complaint against Kroger. These actions ensured that the merger would never close, and further demonstrated that Albertsons had long before shifted its focus towards the litigation that is now pending between the parties, abandoning its contractual obligation to use best efforts to close the transaction.”

Kroger seeks damages from Albertsons as a result of its alleged misconduct and material breaches of the merger agreement. Kroger said it will seek to recover its investment made to obtain regulatoriy approval of the merger.

Earlier this month, C&S Wholesalers sued Kroger for allegedly failing to pay a $125 million termination fee.