Albertsons sued Kroger when merger broke up. Now it’s Kroger’s turn. What it alleges

Albertsons and Kroger spent over two years and more than $850 million on an unsuccessful effort to merge. The two supermarket giants are now spending additional money fighting over the fallout.

Kroger filed a countersuit Tuesday against Albertsons over the bitter end to its planned acquisition of the Boise-based grocery chain. Albertsons had called off its $24.6 billion proposed sale and sued its larger rival for breach of contract the morning after the deal was halted by a judge in December over antitrust concerns.

In its lawsuit, Albertsons accused Kroger of failing to secure regulatory approval for the deal. Now, Kroger says it was Albertsons that breached the terms of the merger agreement.

Kroger said in a news release Tuesday that Susan Morris, the soon-to-be CEO of Albertsons, had “secretly communicated” by phone and email with C&S Wholesale Grocers, the small, family-owned East Coast grocery supply company that Albertsons and Kroger had planned to sell hundreds of stores to in order to appease regulators.

Kroger says Morris’ effort undermined its own strategy and led regulators to believe C&S was not up to the job of operating the divested stores. It said a Washington state court cited Morris’ communications when it ultimately blocked the merger.

Albertsons said March 3 that Morris, its executive vice president and chief operations officer since 2018, would replace CEO Vivek Sankaran in May. The announcement came the same day as a notice from Kroger that its CEO, Rodney McMullen, resigned after an internal investigation into his “personal conduct,” the Idaho Statesman reported.

In its lawsuit, Kroger said it won’t pay the $600 million breakup fee it had agreed to pay if the merger fell through.

A spokesperson for Albertsons told the Statesman on Tuesday that the divestiture package Kroger proposed was not enough to assuage regulators’ concerns and that Kroger mismanaged the process, acted in its own self interest and failed to cooperate.

“Kroger’s weak claims are a deliberate tactic to distract from its own ongoing executive leadership issues,” Albertsons said. ” … We are now focused on returning value to Albertsons’ shareholders to compensate for those losses. We look forward to presenting our case in court.”