Federal Judge Adrienne Nelson this afternoon issued a preliminary injunction, ruling in favor of Federal Trade Commission (FTC) efforts to block Kroger’s proposed $24.6 billion acquisition of Albertsons.
One hour later, King County Superior Court Judge Marshall Ferguson ruled that the state’s Consumer Protection Act prohibits the merger from taking place. Ferguson stressed in his ruling that it did not take into account whether the merger was good or bad, just whether it violated state law.
In other words, Kroger and Albertsons ended the day 0-2.
A ruling in Colorado, where the state Attorney General also is attempting to block the merger, is still expected.
According to the Wall Street Journal, Federal Judge Nelson sided “with Biden administration antitrust enforcers who said the $20 billion supermarket merger would erode competition and raise prices for consumers. She agreed with the regulatory argument “that Kroger would become the dominant player in traditional supermarkets if allowed to add nearly 2,000 stores by taking over Albertsons, its smaller rival. Nelson rejected the companies’ counterargument that selling 579 stores to C&S Wholesale Grocers would replace the lost competition.”
The New York Times writes that “her ruling, which came about three months after a hearing that featured testimony from top executives and economic experts, puts the merger on shaky ground as the companies defend their deal against two separate lawsuits filed in state courts.”
As of this posting, neither Kroger nor Albertsons has issued a statement responding to the ruling. It is up to the retailers whether they should appeal the decision.
However, as recently as last week Kroger CEO Rodney McMullen said that Kroger would be just fine if the merger deal was rejected by the court or courts, and that he would not instantly begin looking for other acquisition targets.
“There’s probably nothing else that would be transformational that would use the balance sheet capacity that we would have. So I don’t know that we would be out there trying to find what’s the next Albertsons …. We’ve always made sure that we don’t need to do mergers to make our business successful. We’re super excited about Albertsons and the potential, and we believe we will be able to add a ton of value. But if it doesn’t happen, we’ll continue to go on … We always will continue to look at ways to grow the business. Mergers is always one of those ways, but we try to make sure that we only do a merger when it makes sense, and we’re not chasing something.”
Part of the deal includes a $600 million breakup fee that Kroger would have to pay Albertsons if it walks away from the acquisition. The question is whether it will do so, or appeal the decision, even as far as the US Supreme Court.
