Kroger is facing another lawsuit stemming from its failed merger attempt with Albertsons.
C&S Wholesale Grocers has sued Kroger, alleging that the grocer hasn’t paid a $125 million termination fee it owes the wholesaler related to the failed Kroger-Albertsons merger. C&S had agreed to acquire stores and assets Kroger and Albertsons had planned to divest to win regulatory approval for the merger.
The Wall Street Journal first reported the news about the lawsuit, which was filed in Delaware Superior Court.
“Kroger failed to identify any reason for its refusal to pay the Termination Fee it owed C&S — because there is none,” the complaint says.
After the initial divestiture deal with C&S faced criticism and scrutiny by state and federal regulators, C&S, Kroger and Albertsons agreed to a new divestiture plan with a $125 million termination fee for C&S — more than triple the original $50 million termination fee, according to the complaint.
Under the revised plan, C&S agreed to buy 579 stores and additional non-store assets such as infrastructure and access to the Signature and O Organics private brands. That agreement fell apart when judges in state and federal courts blocked the merger at the end of last year.
“It is disappointing that C&S has decided to file a baseless lawsuit when it is clear that C&S forfeited its right to a termination fee and has no reasonable claim to any damages. Kroger will vigorously defend itself,” a Kroger spokesperson said in an emailed statement. The grocer did not explain why it believes C&S forfeited its right to the fee.
Almost immediately following two court decisions that blocked their proposed merger, Albertsons sued Kroger, alleging that Kroger did not offer it an adequate divestiture package and repeatedly ignored regulators’ antitrust concerns. Albertsons amended its complaint earlier this year to include the allegation that Kroger refused to pay Albertsons the $600 million termination fee associated with the merger.
The two lawsuits add to Kroger’s woes. Rodney McMullen resigned suddenly earlier this month, ending his 11-year career as Kroger’s CEO after an ethics investigation found his personal conduct was “inconsistent” with the company’s ethics policy. Kroger appointed Ronald Sargent as chairman of the board of directors and as interim CEO while the grocer searches for a new chief executive.
