The Kroger Co. has filed an answer and counterclaims to the complaint brought by Albertsons in the Delaware Court of Chancery, in connection with the previous merger agreement between the two companies, which was terminated in December.
The court filing that Kroger issued stated that while “[it] 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.
“Albertsons’s misconduct … came to light in the middle of the antitrust trials under government cross-examination of Susan Morris, Albertsons’s recently promoted CEO designate.”
[RELATED: Kroger Ends Albertsons Merger, Initiates Share Buyback Program]
Counterclaims background
The countersuit continues, detailing the reasons why Kroger contends Albertsons is not entitled to the $600 million termination fee or any other damages it is seeking.
According to the filing, “While Kroger was working to seek regulatory approval … Albertsons executives (including Ms. Morris) were secretly working with C&S to supplant and undermine Kroger’s regulatory strategy.
“The misconduct included Ms. Morris’s secret communications with C&S’s CEO and others, utilizing personal emails and cell phones to advance Albertsons’s strategy. This strategy resulted in C&S criticizing the divestiture package that C&S had voluntarily agreed to, which in turn caused regulators to believe that C&S was an inadequate divestiture buyer. The Washington court cited these very communications when it ultimately blocked the merger.”
The counterclaims also describe “Albertsons’s development of a ‘Plan B’ to sue Kroger in the event the merger failed to close, by manufacturing a paper trail over many months, including unfounded allegations by Albertsons that are directly contrary to the under-oath testimony that their executives gave during the antitrust trials.”
Kroger went on to note that while it continued to “pursue all remaining options,” Albertsons terminated the agreement within hours of the court decisions to block the deal and filed a 140-page complaint against Kroger.
Kroger maintains that “these actions ensured that the merger would never close, and further demonstrated that Albertsons had long before shifted its focus toward the litigation that is now pending between the parties, abandoning its contractual obligation to use best efforts to close the transaction.
“Through its counterclaims, Kroger is affirmatively seeking damages from Albertsons as a result of its willful misconduct and material breaches of the merger agreement. Kroger will seek to recover the investment it made to obtain regulatory approval for the merger while Albertsons was surreptitiously working to undermine it.”
[RELATED: Albertsons Suing Kroger For Breach Of Merger Agreement]