Albertsons Wants Details on Ex-Kroger CEO’s Personal Conduct (1)

Albertsons Cos. demanded that Kroger Co. provide details on personal conduct that led the company to replace its chief executive officer, who shepherded the failed $24.6 billion takeover that’s now the focus of litigation between the two companies.

Earlier this year, Kroger announced that Rodney McMullen abruptly resigned after a board investigation into his behavior that was “inconsistent” with its policy on “business ethics,” but the company didn’t elaborate.

Albertsons attorneys wrote in a court filing Sunday that they need to know what happened since “McMullen micro-managed the merger from beginning to end, and his business ethics (or lack thereof) lie at the heart of this case.”

The demand comes as part of litigation in Delaware Chancery Court where the country’s largest grocery chains are blaming each other for a failed takeover by Kroger that was blocked on antitrust grounds. Albertsons was first to sue, seeking billions of dollars in damages because it said that Kroger didn’t exercise “best efforts” to win regulatory approval. Kroger shot back, accusing Albertsons of undermining the deal and trying to collect a $600 million termination fee with baseless claims.

Kroger, the largest US grocery chain, agreed two years ago to purchase No. 2 grocer, Albertsons. But the US Federal Trade Commission sued to stop the deal for antitrust reasons. A federal judge blocked the deal in December and Albertsons became the first to terminate the deal following the ruling.

Albertsons declined to comment on the company’s filing.

McMullen didn’t immediately respond to an email seeking comment.

In its Sunday court filing, Albertsons argued that it was critical to get information on McMullen since he will be a key witness for Kroger. His conduct “raises significant concerns not only regarding his credibility, integrity, and compliance with the law, but also about his focus during the merger process and his ability to fulfill Kroger’s contractual obligations to Albertsons,” attorneys for Albertsons wrote.

A Kroger spokesperson said that while the company “continues to focus on delivering outstanding value to its customers and communities, Albertsons’ desperation is once again on full display in this latest attempt to distract from its own misconduct during the regulatory process.”

Kroger provided little detail in March when it announced McMullen’s departure after an investigation. At the time, the company said that his conduct didn’t relate to the company’s financial performance or employees.

Albertsons argued in its filing that it can’t take Kroger at its word that McMullen’s conduct had nothing to do with the merger or any issue in the litigation.

“Kroger has not explained why that conduct was so egregious that the Kroger board determined McMullen was unfit to serve as CEO and forced him out within 10 days of its discovery,” attorneys for Albertsons wrote.

Jill Fisch, a University of Pennsylvania law professor who teaches about corporate law and CEO behavior, said Monday in an email, “Without getting the details, there’s no way to know for Albertsons to know if Kroger’s CEO engaged in wrongdoing, such as failing to engage in his best efforts to navigate regulatory approval for the merger.”

The case is Albertsons v. Kroger, 2024-1276, Delaware Court of Chancery.

(Updates with outside comment.)

--With assistance from Jaewon Kang.

To contact the reporters on this story:
Sabrina Willmer in Washington at swillmer2@bloomberg.net;
Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Elizabeth Wasserman

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