In a significant shift in the retail grocery landscape, Albertsons Companies (NYSE:ACI), Inc. (market cap: $10.7 billion) has terminated its merger agreement with The Kroger Co (NYSE:KR)., a move that follows a court ruling blocking the proposed union. According to InvestingPro data, Albertsons maintains a GOOD financial health score despite trading at a modest P/E ratio of 11. On Monday, Albertsons sent a notice to Kroger officially ending the previously announced merger plan, which had been set forth on October 13, 2022.
The decision to call off the merger came in the wake of a December 10, 2024 preliminary injunction issued by the United States District Court for the District of Oregon in the case between the Federal Trade Commission and the two grocery giants. The court's injunction effectively halted the merger from proceeding.
Albertsons' action to terminate the agreement is in line with the terms set out in the Merger Agreement, specifically citing Section 8.1(e), which provides the company the right to terminate under such circumstances.
The initial merger plan, detailed in an 8-K filing by Albertsons on October 14, 2022, outlined a strategy where Kettle Merger Sub, Inc., a subsidiary of Kroger, would merge with and into Albertsons, resulting in Albertsons becoming a direct, wholly owned subsidiary of Kroger.
The termination of this deal marks a notable development for investors and the industry, signaling the complexities and challenges that major mergers can face, particularly from regulatory bodies concerned with antitrust issues.
This news is based on a recent SEC filing by Albertsons, which provides official confirmation of the termination of the merger agreement. The company's Vice President - Corporate & Securities, Corporate Secretary Bipasha Mukherjee, signed the report on behalf of Albertsons on Wednesday, December 11, 2024.
In other recent news, Albertsons Companies, Inc. has terminated its merger agreement with Kroger Co. following court injunctions. Albertsons has since filed a lawsuit against Kroger, alleging refusal to divest assets necessary for antitrust approval and neglect of regulators' feedback among the reasons for the merger's failure. The company is seeking billions in damages to compensate for the lost premium Kroger had agreed to pay for its shares and the subsequent decline in shareholder value.
Albertsons is now free to explore other strategic options and is seeking relief for the extensive investment made to secure merger approval. Despite these developments, the company maintains a strong financial outlook with a projected identical sales growth between 1.8% and 2.2% for fiscal 2024, adjusted EBITDA between $3.90 and $3.98 billion, and adjusted net income per share between $2.20 and $2.30.
The company's board plans to increase the quarterly cash dividend by 25% from $0.12 to $0.15 per share and has authorized a new share repurchase program of up to $2 billion. RBC Capital Markets has revised Albertsons' price target from $22.00 to $21.00, maintaining an Outperform rating on the stock.
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