We hear about companies merging all the time. Maybe potential partners are negotiating the deal, it’s been approved by shareholders, or it’s being stopped for anti-trust reasons. If you want your company to merge with another, the parties may find themselves in court if you don’t pull it off under certain circumstances as a mergers and acquisitions lawyer can share.
It was supposed to be the largest supermarket company in US history, according to CNN, but the deal between two supermarket giants collapsed, and one is suing the other. Grocery store chain Albertsons called off the proposed $25 billion merger with Kroger in December, a day after judges in Washington and Oregon blocked the proposal. Unions and federal and state competition regulators were against the merger and filed lawsuits to stop it.
Cutting Business Costs While Increasing Prices For Consumers?
Supermarkets have always fiercely competed against each other, but now they’re also dealing with Amazon and Walmart getting into the grocery business through brick-and-mortar stores and online. Kroeger’s and Albertson’s workforces are mostly unionized. The merger was a way to better compete with non-union labor and cut costs.
Oregon federal judge Adrienne Nelson ruled that the parties are “distinct from other grocery retailers” and do not directly compete with Walmart, Amazon, or other companies that sell a broader range of goods. She blocked the merger because she thought it would end head-to-head competition between the two, potentially raising consumers’ costs.
The two sides have been working on this for a while. The merger was announced in 2022. The goal was to combine the tenth and fifth largest US retailers. The two own dozens of grocery chains, including Harris Teeter, Vons, Safeway, and Fred Meyer. The breakup of this proposed corporate marriage didn’t go well.
Failed $25 Billion Merger Could Lead To Legal Slugfest
Albertsons chose to end the merger agreement, according to its CEO Vivek Sankaran. They’ve also brought a breach of contract action against Kroger. They charge the company with causing the merger to be blocked by failing to exercise its “best efforts” and taking “any and all actions” to ensure the merger’s regulatory approval.
Tom Moriarty, Albertsons’ General Counsel and Chief Policy Officer, in a company press release, stated:
“Rather than fulfill its contractual obligations to ensure that the merger succeeded, Kroger acted in its own financial self-interest, repeatedly providing insufficient divestiture proposals that ignored regulators’ concerns. Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons’ shareholders, associates and consumers. We are disappointed that the opportunity to realize the significant benefits of the merger has been lost on account of Kroger’s willfully deficient approach to securing regulatory clearance…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 it’s seeking billions of dollars to make it and its shareholders whole. They say they’re denied a multi-billion-dollar premium Kroger agreed to pay for Albertsons’ shares. Moriarity alleges they’ve also suffered a decreased shareholder value because they were focused on what would be a failed merger, not on other opportunities. Albertsons also wants a $600 merger termination fee that was part of their merger agreement.
Kroger didn’t let the legal mud-slinging slide. They announced Albertson’s legal claims are “baseless and without merit” and an attempt to deflect Albertson’s “multiple (contract) breaches” to try to get the termination fee they’re not entitled to. Kroger insists it went to “extraordinary lengths” to make the merger happen.
You may not own a multi-billion dollar grocery store chain, but if you want to merge your business with another, many potential tripwires could result in legal action as our friends at Focus Law LA know all too well. If you’re considering a merger with another company, talk to your attorney about how to make the merger happen while preventing lawsuits.