Albertsons (ACI) officially terminated its $25 billion merger agreement with Kroger (KR) on Wednesday after a court ruling blocked the deal. The grocery chain also filed a lawsuit against Kroger, accusing it of breaching the contract that led to the deal’s termination. Albertsons claimed Kroger failed to take “any and all actions” to secure regulatory approval. The company is seeking billions in damages along with a $600 million termination fee.
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In light of the deal’s failure, Albertsons’ CEO Vivek Sankaran expressed disappointment, stating, “Given the recent federal and state court decisions to block our proposed merger with Kroger, we have made the difficult decision to terminate the merger agreement.”
ACI-KR Deal Faced Many Regulatory Hurdles and Legal Challenges
The ACI-KR deal faced numerous regulatory hurdles and legal challenges throughout its course. Ultimately, the decision to end the merger came after federal and state courts sided with the Federal Trade Commission (FTC) on Tuesday, blocking the deal. Specifically, the FTC argued that the merger would stifle competition, lead to higher prices for consumers, and weaken the bargaining power of unionized workers.
Despite these setbacks, Kroger defended the merger, arguing it would lower prices at Albertsons stores, which it claimed were 10% to 12% more expensive than Kroger’s. Kroger also highlighted its plans to reinvest anticipated cost savings from the merger into further price reductions and customer base expansion.
Kroger Dismisses Allegations
Meanwhile, in response to Albertsons’ lawsuit, Kroger dismissed the allegations as “baseless and without merit.” The company countered, “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.”
Is ACI a Good Buy?
Analysts remain cautiously optimistic about ACI stock, with a Moderate Buy consensus rating based on three Buys and five Holds. Over the past year, ACI has declined by more than 10%, and the average ACI price target of $20.83 implies an upside potential of 12.5% from current levels.
