Just over a week after the CEOs of the two largest U.S. grocery companies testified in a U.S. District Court in Oregon to seek approval for their $25 billion merger, Albertsons executives reportedly realized the deal faced significant challenges.

New documents in the lawsuit filed by the Boise, Idaho-based grocery chain against Kroger reveal that Albertsons proposed an $800 million settlement to resolve the case with federal regulators, as reported by Boise Dev. This information comes from an updated complaint in Albertsons’ $600 million lawsuit against its former merger partner.

According to the court filing cited by Boise Dev, during board discussions, Albertsons decided to offer Kroger financial compensation potentially valued at over $1 per share of Albertsons (approximately $800 million) to improve the merger's chances of receiving regulatory approval through a settlement or favorable court decisions.

Albertsons claims that former CEO Rodney McMullen overlooked this offer and that Kroger “soured” the agreement by failing to collaborate with federal regulators. The updated complaint also states that Kroger could have included 33 stores in Washington and two in Colorado on its divestiture list to address lawsuits from attorneys general in those states.

Albertsons argues that this move would have created a new pathway to finalize the merger through negotiations with the Federal Trade Commission (FTC), even if a preliminary injunction had been issued in the FTC’s lawsuit.

Additionally, reports indicate that Kroger did not complete the deal within the initially projected timeframe of early 2024. The updated lawsuit emphasizes that Kroger should have prioritized obtaining antitrust clearance well ahead of the original closing date instead of relying on extensions, as political changes can complicate the clearance process.

Albertsons contends that allowing the lawsuit to extend into the 2024 election season heightened public scrutiny of the merger. 

The lawsuit states, “This is especially true for a merger between grocery retailers, as affordable groceries are critical to many voters. Consequently, the election year inevitably brought increased political attention to the industry, making regulators more cautious about approving a merger that could lead to higher grocery prices, although the merger was intended to lower prices.”

Kroger filed a legal response on March 25, alleging that "while Kroger was working diligently to seek regulatory approval and close the merger, Albertsons was engaging in a secret and misguided campaign, together with C&S Wholesale Grocers, the divestiture buyer, to pursue its own regulatory strategy, which ultimately undermined Kroger's efforts," the gocer posted on its website. 

Albertsons's actions came to light in the middle of the antitrust trials under government cross-examination of Susan Morris, Albertsons's recently promoted CEO designate, Kroger further argued in its statement. As a result, Albertsons would not be entitled to the $600 million termination fee under the terms of the parties' merger agreement, nor to the other damages it seeks.

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