The Albertsons-Kroger Mega-Merger Is Dead

Albertsons said Wednesday that it is terminating its $25 billion merger agreement with Kroger and suing its rival, ending a controversial bid to combine two of the largest grocery companies in the U.S.

The decision to spike the deal follows a federal court order Tuesday that stopped it from moving forward. The judge in the case found that the Federal Trade Commission was likely to prevail in its argument that the merger violates antitrust law.

Albertsons and Kroger faced a separate legal setback in Washington state court on Tuesday as well, indicating just how difficult a time they would have getting the deal through and putting roughly 4,000 grocery stores under one company.

Albertsons CEO Vivek Sankaran said in a statement that the company made the “difficult decision” to kill the agreement after the courts issued injunctions.

“We are deeply disappointed in the courts’ decisions,” Sankaran said.

Albertsons said Kroger had “repeatedly ignored regulators’ concerns” that the deal would stifle competition, and failed to take steps that could have helped it achieve regulatory approval.

“Kroger willfully breached the Merger Agreement in several key ways, including by repeatedly refusing to divest assets necessary for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers and failing to cooperate with Albertsons,” the company said in a statement.

Kroger said it was disappointed by the judges’ decisions issued Tuesday and maintained that the merger would benefit consumers and employees. The company called Albertsons’ lawsuit, which was filed in Delaware, “baseless and without merit.”

“Kroger refutes these allegations in the strongest possible terms, especially in light of Albertsons’ repeated intentional material breaches and interference throughout the merger process,” the company said in a statement.

The FTC and several state attorney generals claimed that the merger would reduce competition in hundreds of local markets around the country, leading to higher prices for shoppers and lower pay for grocery store workers. They had the backing of several consumer groups and labor unions in their effort to quash the deal on the grounds it was anti-competitive.

Albertsons’ decision to abandon the deal amounts to a major win for the FTC and its progressive chair, Lina Khan, who was appointed by President Joe Biden. The agency maintained that allowing the deal to go through would have pushed grocery prices up even higher after a period of elevated inflation.

Kroger and Albertsons own dozens of major store brands between them, including Fred Meyer and Ralphs (Kroger), and Safeway and Jewel-Osco (Albertsons). They also employ some 700,000 workers, many of them represented by the United Food and Commercial Workers union.

The union’s president, Marc Perrone, said it was glad to see the court decisions undermine the deal.

“These grocery chains are highly successful because of the hard work of our members and workers across the country, and no merger or divestiture of stores should be allowed to endanger or threaten their vital role,” he said in a statement.

This story has been updated with comment from Kroger.