Albertsons Terminates $25 Billion Merger with Kroger, Files Lawsuit
The proposed $25 billion merger between grocery giants Albertsons and Kroger – set to be the largest supermarket deal in U.S. history – has officially collapsed. Albertsons announced the termination on Wednesday, just one day after a federal judge blocked the merger, citing concerns over reduced competition and potential price hikes for consumers.
In addition to ending the deal, Albertsons has filed a lawsuit against Kroger, accusing it of breaching their merger agreement. The grocery chain claims Kroger failed to take all necessary actions to secure regulatory approval, as stipulated in their contract. Kroger, however, rejected the allegations, calling them “baseless and without merit” and countering that Albertsons had committed “multiple breaches.” Kroger insisted it had gone to “extraordinary lengths” to push the merger forward.
The deal, first announced in 2022, aimed to combine two of America’s largest grocers – operators of well-known chains such as Safeway, Vons, Harris Teeter, and Fred Meyer – to better compete against retail giants like Walmart and Amazon. Both companies, which predominantly employ unionized workforces, argued that merging would enhance their ability to lower prices and remain competitive in an increasingly challenging market.
However, opposition to the merger proved formidable. A coalition of unions, independent grocers, and bipartisan political leaders raised concerns about corporate consolidation, warning that reduced competition could harm consumers. The Federal Trade Commission (FTC) also filed a lawsuit to block the merger, marking a significant victory for outgoing FTC Chair Lina Khan, a vocal critic of large-scale mergers.
Federal Judge Adrienne Nelson, in her decision to halt the deal, underscored that supermarkets operate within a distinct market separate from retailers like Walmart and Amazon, which offer a broader range of goods. The judge ruled that combining Kroger and Albertsons would eliminate direct competition between the two chains, potentially leading to higher prices and fewer choices for consumers.
Market reaction to the merger’s collapse was largely positive. Both Kroger’s and Albertsons’ shares rose on Wednesday, with Albertsons further bolstering investor confidence by announcing plans to repurchase up to $2 billion in shares. The company also reiterated its commitment to improving its stores, technology, and workforce.
While the deal’s failure may present challenges for Albertsons, analysts suggest Kroger remains well-positioned to continue its growth independently. Kroger CEO Rodney McMullen signalled last week that the company’s success does not hinge on mergers. “We’ve always made sure that we don’t need to do mergers to make our business successful,” McMullen stated. “If it doesn’t happen, we’ll continue to go on.”
As competition intensifies across the grocery industry, Albertsons and Kroger now face the task of charting independent paths forward while navigating shifting consumer trends and economic pressures.
