The Kroger Co. recently filed its response and counterclaims to the complaint brought by Albertsons in the Delaware Court of Chancery, in connection with the previous merger agreement between the two companies, which was terminated in December 2024.

As detailed in the court filing, Kroger finds while it was working to seek regulatory approval and close the merger, Albertsons was engaging in a secret campaign, together with C&S Wholesale Grocers, the divestiture buyer, to pursue its own regulatory strategy, which ultimately undermined Kroger's efforts. Albertsons' misconduct came to light in the middle of the antitrust trials under government cross examination of Susan Morris, Albertsons' recently promoted CEO designate. As a result of its misconduct, Kroger finds that 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 states that the misconduct included Morris' hidden communications with C&S's CEO and others, utilizing personal emails and cell phones to advance Albertsons' 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. The Washington court cited these communications when it ultimately blocked the merger.

The counterclaims also describe Albertsons' development of a Plan B to sue Kroger in the event the merger failed to close, by manufacturing a paper trail over many months including unfounded allegations by Albertsons that are directly contrary to the under-oath testimony that their executives gave during the antitrust trials.

Kroger states it was prepared, in the event of adverse court decisions, to pursue all remaining options to close the merger. But, within hours of the court decisions blocking the merger, Albertsons terminated the merger agreement and filed a 140-page complaint against Kroger.

Through its counterclaims, Kroger is affirmatively seeking damages from Albertsons as a result of its willful misconduct and material breaches of the merger agreement. Kroger will seek to recover the investment it made to obtain regulatory approval for the merger.

Source: Kroger Co.