USA | Albertsons Companies, Inc. has filed a lawsuit against Kroger Co. in the Delaware Court of Chancery.
Pursuant to the Court of Chancery rules, Albertsons’ complaint against Kroger is temporarily under seal.
It has brought claims for willful breach of contract and breach of the covenant of good faith and fair dealing arising from Kroger’s failure to exercise “best efforts” and take “all actions” to secure regulatory approval of the company agreed merger transaction, as required of Kroger under the terms of the merger agreement between the parties.
Kroger willfully breached the Merger Agreement in several key ways, including repeatedly refusing to divest assets necessary for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers and failing to cooperate with Albertsons.
“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. Rather than fulfil its contractual obligations to ensure that the merger succeeded, Kroger acted in its financial self-interest, repeatedly providing insufficient divestiture proposals that ignored regulators’ concerns,” said Tom Moriarty, Albertsons’ General Counsel and Chief Policy Officer.
“Kroger’s self-serving conduct has harmed Albertsons’ shareholders, associates and consumers. We are disappointed that the opportunity to realise the significant benefits of the merger has been lost on account of Kroger’s willfully deficient approach to securing regulatory clearance.”
Moriarty added they had taken this action to enforce and preserve rights and to protect the interests of our shareholders, associates and consumers.
“We believe strongly in the merits of our case and look forward to presenting it to the Court to hold Kroger responsible for the harm it has caused.”
Albertsons’ claims against Kroger were confirmed by the recent rulings from the United States District Court for the District of Oregon and the King County Superior Court for the State of Washington, which granted regulators’ requests to block the merger.
Those results could have been avoided for Kroger’s breaching conduct.
Albertsons has sought billions of dollars in damages from Kroger to make it and its shareholders whole. However, its shareholders have been denied the multi-billion-dollar premium Kroger agreed to pay for Albertsons’ shares.
They have been subjected to decreased shareholder value because Albertsons could not pursue other business opportunities as it sought approval for the transaction. Albertsons also sought to recover for the time, energy, and resources it invested in good faith to try to make the merger successful.
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,
Albertsons has notified Kroger of its decision to terminate the merger agreement. This termination 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, the company was entitled to relief and the extended period of unnecessary limbo due to Kroger’s actions. It further sought to recover certain expenses and costs.
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