The grocery chain Albertsons said on Wednesday that it had backed out of its $25 billion merger with Kroger and sued the company for failing to adequately push for regulatory approval, after both a federal and state judge blocked the deal on Tuesday.
The deal, which would have been the biggest grocery store merger in U.S. history, faced three separate legal challenges — one filed by the Federal Trade Commission — over concerns that the combined company would reduce competition and raise prices. Judge Adrienne Nelson of U.S. District Court for the District of Oregon temporarily halted the deal on Tuesday, siding with federal regulators who have argued that the merger would risk reducing competition at the expense of consumers and workers.
Another decision blocking the merger in Washington State court, just one hour later, added to the hurdles facing the companies.
“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,” Vivek Sankaran, chief executive of Albertsons, said in a statement. “We are deeply disappointed in the courts’ decisions.”
On Wednesday, Albertsons also said it filed a lawsuit against Kroger in the Delaware Court of Chancery, seeking billions of dollars in damages and accusing Kroger of failing to exercise “best efforts” to secure regulatory approval. Kroger refused to divest assets necessary for antitrust approval, ignored regulators’ feedback and rejected stronger buyers of divested stores, Albertsons said in a statement announcing the lawsuit.
Kroger did not immediately respond to a request for comment on the termination of the merger and on Albertsons’s lawsuit.
The supermarket chains spent hundreds of millions of dollars over the past two years on the deal that would have created a $200 billion company with 5,000 supermarkets across the country. The companies argued that the merger was necessary to compete with giants like Walmart and Amazon.
The two chains have significant overlap in some markets, including Los Angeles, Seattle and Chicago. Kroger had taken steps to try to allay regulators’ concerns about market concentration in such areas. The company had said it would sell 579 Kroger and Albertsons stores to a third company, called C&S Wholesale Grocers, though regulators were skeptical that the store sales would resolve competition concerns.
The federal court decision in Oregon was a final success for Lina Khan, the outgoing head of the F.T.C., who has pushed to scale back the power of some of the country’s biggest corporations. On Tuesday, President-elect Donald J. Trump named Andrew Ferguson, a Republican who sits on the commission, to replace her as its head.
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