Kroger Company's K.R. $25 billion offer to acquire rival supermarket Albertsons Companies ACI was in play on Monday after the Federal Trade Commission (FTC) filed a lawsuit to block the merger.
Kroger shares fell 1.7%, while Albertsons gained 0.6% after the FTC said it had filed a lawsuit in federal court in Oregon to stop the merger from going forward.
Kroger had sold the deal to Albertsons on the premise that the combined company would be better positioned to compete with larger rivals such as Walmart Inc. WMT and Costco Wholesale Corp COST.
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Financial strain for consumers
In challenging the merger, the FTC argued that the deal would result in higher food prices and lower wages for the combined company's staff.
“This supermarket megamerger comes as American consumers have seen the cost of food rise steadily in recent years. “Kroger's acquisition of Albertsons would result in additional price increases on everyday products, further exacerbating the financial stress facing consumers across the country today,” he said. Henry Liudirector of the FTC's bureau of competition.
in a press statement On Monday, Kroger responded by saying that blocking the deal would harm the very people the FTC aims to protect.
“Kroger's business model is to remove costs from the business and invest in lower prices for customers. “Kroger has reduced prices every year since 2003,” the statement said.
He added: “This decision only strengthens the largest, non-union retailers like Walmart, Costco and Amazon AMZN allowing them to further increase their overwhelming and growing dominance of the grocery industry.”
Companies will defend the merger in court
Cincinnati-based Kroger operates about 2,700 stores under its namesake brand and regional stores such as Fred Meyer and Ralph's, while Albertsons operates about 2,300, including the Safeway chain.
Kroger said it hoped to defend the merger in court, “so we can deliver the benefits to communities across America: lower prices, more choices and more good-paying union jobs for decades to come.”
Previous so-called megamergers that the FTC tried to block include Microsoft Corporation's MSFT Acquisition of a game production company for $68.7 billion Activision Blizzardwhich will be completed in October 2023.
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