Kroger Company (NYSE: KR) shares are trading higher premarket on Thursday. The company disclosed the termination of its merger agreement with Albertsons Companies, Inc. (NYSE: ACI) following a preliminary injunction by the U.S. District Court in Oregon.
U.S. District Judge Adrienne Nelson ruled in favor of the U.S. Federal Trade Commission (FTC) in a decision filed in Oregon federal court on Tuesday.
The FTC had argued that the proposed deal violated antitrust laws. The companies submitted a plan to the FTC that included the divestiture of hundreds of stores to C&S Wholesale Grocers in order to maintain appropriate competition in the space.
Nelson on Tuesday found that the divestiture plans wouldn't do enough to replace competition that would be impacted as a result of the deal.
Earlier yesterday, Albertsons announced the termination of its proposed merger with Kroger and filed a lawsuit against the grocery giant, accusing Kroger of violating the contractual obligations of the merger agreement by failing to do all it could to secure regulatory approval.
Later yesterday, Kroger issued a statement that it looks forward to accelerating its flywheel to grow alternative profit businesses and generate increased cash flows.
Rodney McMullen, Kroger's Chairman and CEO said, "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."
Kroger reiterated its commitment to investing in America to lower grocery prices, higher wages, infrastructure, and community support.
Kroger has invested $5 billion in price reductions since 2003 and $2.4 billion in wage increases since 2018, raising average hourly pay by 38% with benefits.
Additionally, Kroger allocates $3.6 billion to $3.8 billion annually in capital investments to build and remodel stores, enhance food processing facilities, improve the customer experience, and create new job opportunities.
Buyback: Kroger's Board approved a new $7.5 billion share repurchase program, replacing the previous $1 billion authorization from September 2022.
The company plans to execute an accelerated share repurchase (ASR) agreement for about $5 billion of common stock. Kroger anticipates strong free cash flow and remains focused on capital allocation priorities.
Following the termination of the merger agreement, Kroger will redeem $4.7 billion in senior notes issued on August 27, 2024.
The notes, which include a special mandatory redemption clause, will be redeemed at 101% of their principal amount, plus accrued interest up to the redemption date.
Investors can gain exposure to the stock via Invesco Food & Beverage ETF (NYSE: PBJ) and Tidal ETF Trust Newday Ocean Health ETF (NYSE: AHOY).
Price Action: KR shares are up 0.99% at $61.33 premarket at the last check Thursday.