Kroger announced that it has settled the lawsuit filed against it by C&S Wholesale Grocers in the wake of its unsuccessful $24.6 billion acquisition of Albertsons.
Had the deal gone through, C&S was salted to take possession of close to 600 stores that would have been divested because of government antitrust concerns. When the acquisition by both a state and federal court, Albertsons bailed out of the deal and sued Kroger for billions, saying that its suitor didn’t do enough to make the deal pass muster with regulators. Kroger fired back, saying that Albertsons was guilty of “repeated intentional material breaches and interference throughout the merger process.”
C&S Wholesale then sued, claiming Kroger owed it a $125 million termination fee under the terms of their agreement; getting those hundreds of stores would have a) jumpstarted its retail diversification efforts, and b) given it a significant number of new guaranteed locations that it could supply. (C&S continues in that direction with moves like its announced $1.77 billion acquisition of SpartanNash, which adds more than 200 stores to its portfolio.)
Now, Kroger is saying that all the C&S claims have been resolved, though nobody is divulging the terms of the settlement.
“We are pleased to resolve the claims from C&S, and we look forward to a friendly relationship with them going forward,” said Ron Sargent, Chairman and CEO of Kroger. “Kroger remains focused on serving our customers and running great stores across the U.S.”
Albertsons’ litigation against Kroger remains in play, and part of it is the plaintiff’s demand to know why Rodney McMullen – the Kroger CEO who appeared to be driving and advocating for the deal to be executed – resigned several months after the merger deal collapsed. His resignation came after a company ethics investigation; Kroger’s board said that the case was not financial, nor did it involve company employees, but that “certain personal conduct” by McMullen was “inconsistent” with company policy.
Whether or not Albertsons is successful in compelling Kroger to disclose McMullen’s offending behavior, yet another lawsuit may yield that information.
BoiseDev reports that folksinger Jewel has sued Kroger, “saying the grocery giant breached a contract over a wellness festival in Cincinnati.” Jewel says that “Kroger took control of the festival after it turned profitable and cut her out” of profits to which she was entitled.
As part of that suit, Jewel’s attorneys have asked for McMullen to be compelled to testify as to the nature of his ethical breach; to this point, McMullen’s lawyers have instructed him not to answer these questions, saying that while his answers would be irrelevant to the case, they would cause him “embarrassment.”
The judge in the case reportedly has ordered McMullen to answer the question about the cause of his resignation in writing, and that she then will decide whether it is germane to the case and if it should be made part of the public record.
KC’s View:
It is a positive for Kroger that what I keep calling a clustermuck of accusations, recriminations and litigation is just a little bit less mucky.
Let’s be clear about one thing – I have not met one person in the food industry who does not want to know why McMullen, for all practical purposes, was canned. Largely, that’s because he always seemed like the kind of guy who was incapable of an ethical breach on this scale. Whether one sees it from the perspective of an employee, vendor, executive peer, industry associate, investor or pundit, people feel, in one way or another, deceived. They want to know.
Seems to me that if Kroger really wants to keep this quiet, it needs to just settle all these lawsuits and move on. Because as long as the courts have the opportunity to weigh in, there always will be a chance that this information is going to come out.
BTW, I’m no attorney, but I have to admit to being puzzled by the suggestion that “embarrassment” is enough to keep one from testifying truthfully and completely. Have these people not watched “Perry Mason?” Or, to cite a more modern media property, “The Lincoln Lawyer?”
One other thing. While the Kroger-C&S settlement is confidential, I’ll be curious to see if, sometime down the road, the two companies announce some sort of distribution deal that will have been conceived during legal negotiations.
The post Kroger Takes One Step Forward But Some Next Steps Are Unclear appeared first on MNB.
View Original Article
