Kroger Co. reported it has terminated its merger agreement with Albertsons and provided an overview of its next steps after Albertsons announced it had withdrawn from the proposed deal.
The moves come after the United States District Court in Oregon granted the U.S. Federal Trade Commission’s request for a preliminary injunction blocking the proposed combination.
Kroger also denounced a lawsuit filed against it by Albertsons claiming Kroger breached the merger agreement by not being aggressive enough in the proposed deal’s defense.
As it moves on from a merger pursuit that began in 2022, Kroger is ready to leverage its strengthened balance sheet, resuming share repurchases after a more than two-year pause. In the period since it announced the merger, Kroger reported it had used strong free cash flow and debt financing to build meaningful balance sheet capacity while maintaining the company’s investment-grade rating. With that in place, the company indicated, Kroger’s board of directors approved a new share repurchase program authorizing the repurchase of up to $7.5 billion of common stock, replacing an existing $1 billion authorization approved in September 2022.
Kroger intends to host an Investor Day event in late spring of 2025 to provide an update on its strategic priorities, future growth prospects and long-term financial outlook, the company noted.
As to its former merger partner’s lawsuit, Kroger insisted Albertsons’ claims are baseless. In refuting the allegations, Kroger emphasized what it called Albertsons’ repeated intentional material breaches and interference in the merger process. Kroger added the lawsuit is an attempt to deflect responsibility following Kroger’s written notification of multiple Albertsons breaches of the agreement. Kroger suggested the move is intended to claim payment of the merger’s break fee, to which, Kroger asserted, Albertson’s is not entitled.
“Kroger is moving forward from a position of strength,” stated Rodney McMullen, Kroger’s chairman and CEO. “Our go-to-market strategy provides exceptional value and unique omnichannel experiences to our customers which powers our value creation model. We look forward to accelerating our flywheel to grow our alternative profit businesses and generate increased cash flows. The strength of our balance sheet and sustainability of our model allows us to pursue a variety of growth opportunities, including further investment in our store network through new stores and remodels, which will be an important part of our 8%–11% TSR model over time.”
McMullene added a commitment to lowering prices to the consumer articulated in the merger process still holds true.
“Kroger has an extraordinary track record of investing in America,” McMullen said. “We are at our best when we serve others – our customers, associates, and communities – and we take seriously our responsibility to provide great value by consistently lowering prices and offering more choices. When we do this, more customers shop with us and buy more groceries, which allows us to reinvest in even lower prices, a better shopping experience and higher wages. We know this model works because we’ve been doing it successfully for many years, and this is exactly what we will continue to do.”
