What a difference a day makes. On Tuesday, they were partners. On Wednesday, they were angry divorcees.

Albertsons called off its proposed sale to Kroger and sued the rival grocer for billions of dollars the morning after a federal judge in Portland blocked the merger. The deal would have combined the nation’s largest and second-largest traditional grocery chains into a colossus and extended a lifeline to Albertsons.

The Boise chain, the smaller of the two, filed breach-of-contract claims in a Delaware chancery court on Wednesday, alleging that Cincinnati-based Kroger failed to exercise “best efforts” and take “any and all actions” to get regulatory approval for the deal, as required in the merger agreement.

“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,” Tom Moriarty, general counsel and chief policy officer for Albertsons, said in a news release. “Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons’ shareholders, associates and consumers.”

Albertsons said the termination of the merger allows it to pursue other options and entitles it to an immediate $600 million fee that Kroger previously agreed to pay.

The company also said it seeks billions of dollars in damages from Kroger to make Albertsons and its shareholders whole for the more than two years and hundreds of millions of dollars that Albertsons devoted to bringing the deal to fruition. The two companies announced the proposed merger in October 2022.

Kroger said it looks forward to responding to the accusations in court.

“This is clearly an attempt to deflect responsibility following Kroger’s written notification of Albertsons’ multiple breaches of the agreement, and to seek payment of the merger’s break fee, to which they are not entitled,” Kroger said in a statement. “Kroger looks forward to responding to these baseless claims in court. We went to extraordinary lengths to uphold the merger agreement throughout the entirety of the regulatory process, and the facts will make that abundantly clear.”

On Tuesday, U.S. District Judge Adrienne Nelson granted a preliminary injunction to block the $24.6 billion deal after a three-week hearing. The Federal Trade Commission and attorneys general from several states argued that the merger would substantially lessen competition in the grocery market. A judge in Washington state also ruled shortly after that the merger violates Washington state antitrust law.

Why the breakup is bad for Albertsons

The breakup is worse news for Albertsons than for Kroger.

Albertsons CEO Vivek Sankaran testified in the federal case that without the merger, “I would have to consider” job cuts, closures and abandoning some markets if the supermarket chain cannot find other ways to lower costs, The Associated Press reported. Without Kroger, Albertsons may need to find another buyer within two to three years, Sankaran said, according to The Wall Street Journal.

Kroger President and CEO Rodney McMullen told investors on a call Thursday that Kroger will “continue to go on” if the merger falls through, Grocery Dive reported.

“We’ve always made sure that we don’t need to do mergers to make our business successful,” McMullen said.

McMullen had pledged to cut grocery prices $1 billion if the merger went through, CBS reported. He had said that many of the cuts would be made at Albertsons’ stores to help retain customers, because Albertson’s prices are 10% to 12% higher than Kroger’s, The Cincinnati Enquirer reported.

The two companies said their merger would help them compete more effectively with Walmart, Amazon, Costco and other retailers. But the FTC and attorneys general from multiple states — not including Idaho or Ohio, where the two chains are based — said it would reduce competition, bringing higher prices and fewer choices for customers.

The companies promised regulators, employees and the public that no divested stores would close, no “front-line” workers would lose their jobs, all collective-bargaining agreements would be honored, and all divested stores would continue to benefit from investment as a result of the merger.

Among brick-and-mortar grocers, Walmart has been gaining market share by dollars spent and now has nearly 24%, according to a report by Numerator, a data analytics company, cited in Supermarket News. Kroger’s has fallen to 10% and Albertsons’ to just over 6%. Combined, Kroger and Albertsons would still be outsold by Walmart.

One reason the two companies cited for uniting was to gain more leverage over suppliers to lower costs. Albertsons has said that it must pay more for some products wholesale than Walmart charges at retail.

Albertsons, a Boise icon, Idaho’s biggest company

As the Idaho Statesman previously reported, the companies proposed to sell 579 stores under assorted banners to pass antitrust muster.

The buyer would have been C&S Wholesale Grocers LLC, a little-known New Hampshire company that has operated primarily as a wholesaler so far. C&S operates two retail grocery chains: Piggly Wiggly in the South, Midwest and Northeast, and Grand Union in New York and Vermont.

The stores included 10 Albertsons supermarkets in Idaho, six of which are in Boise, and one apiece in Meridian and Nampa. The merger had led some Idahoans to to wonder if the 10 stores might be rebranded as Piggly Wiggly stores.

Albertsons is Idaho’s largest company and a Boise icon. It says it has $79 billion in yearly sales, 285,000 employees nationwide and more than 5,000 employees in Idaho, making it the Gem State’s fourth-largest employer.

Started in 1939 with founder Joe Albertson’s first store, Albertsons has more than 2,200 retail food and drug stores under 24 banners in 34 states. The stores include 37 in its native state, all operating under the Albertsons banner.

Divesting 10 Idaho stores would have reduced Albertsons’ Idaho footprint to 27 stores, a distribution center in Meridian and whatever Kroger might have kept of Albertsons’ corporate headquarters operation in Boise.

Kroger’s Fred Meyer unit competes directly with Albertsons in multiple markets, including the Boise area. Fred Meyer, which has seven stories in Idaho’s Treasure Valley, says it employs more than 2,000 Idahoans. Kroger employs more than 400,000 people nationwide.

Kroger agreed in 2022 to pay $34.10 per share for Albertsons stock, a price that valued Albertsons at $24.6 billion. But Albertsons’ stock price has fallen significantly below the price its shareholders would receive if the deal goes through, a sign that investors lost faith in the merger proposal. Albertsons’ stock closed Tuesday at $18.51.

(Idaho Statesman Business and Local News Editor David Staats contributed.)

©2024 Idaho Statesman. Visit at idahostatesman.com. Distributed by Tribune Content Agency, LLC.