TERMINATION OF THE MERGER AGREEMENT

9 Months Ended

Nov. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

TERMINATION OF THE MERGER AGREEMENT

TERMINATION OF THE MERGER AGREEMENT

As previously disclosed, on October 13, 2022, the Company, The Kroger Co. ("Kroger") and Kettle Merger Sub, Inc., a wholly owned subsidiary of Kroger ("Merger Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which Merger Sub would have been merged with and into the Company (the "Merger"), with the Company surviving the Merger as the surviving corporation and a direct, wholly owned subsidiary of Kroger.

Pursuant to the Merger Agreement, each share of Class A common stock issued and outstanding immediately prior to the effective time of the Merger (the "Effective Time"), would have converted automatically at the Effective Time into the right to receive from Kroger $34.10 per share in cash, without interest, reduced by the special cash dividend of $6.85 per share of Class A common stock which was paid on January 20, 2023. The adjusted per share cash purchase price was expected to be $27.25 per share of Class A common stock. All outstanding Company equity awards would have converted to Kroger equity awards as described in the Merger Agreement.

In connection with obtaining the requisite regulatory approval to consummate the Merger, on September 8, 2023, the Company and Kroger announced that the parties had entered into a definitive agreement with C&S Wholesale Grocers, LLC ("C&S") for the sale of select stores, banners, distribution centers, offices and private label brands. On April 22, 2024, the Company and Kroger announced they had amended the definitive agreement with C&S. The divestiture to C&S was subject to fulfillment of customary closing conditions, including clearance by the United States Federal Trade Commission ("FTC") and the completion of the proposed Merger.

On February 26, 2024, the FTC instituted an administrative proceeding to prohibit the Merger. On the same day, the FTC (joined by nine states) filed suit in the United States District Court for the District of Oregon, requesting a preliminary injunction to enjoin the consummation of the Merger. On January 15, 2024 and February 14, 2024, the attorneys general of the States of Washington and Colorado, respectively, filed suit in their respective state courts, also seeking to enjoin the consummation of the Merger.

On December 10, 2024, subsequent to the end of the third quarter of fiscal 2024, the United States District Court for the District of Oregon issued a preliminary injunction in the case Federal Trade Commission et al. v. The Kroger Company and Albertsons Companies, Inc. (Case No.: 3:24-cv-00347-AN), whereby the court enjoined the consummation of the Merger. In light of the preliminary injunction, and in accordance with Section 8.1(e) of the Merger Agreement, the Company exercised its right to terminate the Merger Agreement and sent a notice to Kroger on December 10, 2024 terminating the Merger Agreement.

On December 10, 2024, the King County Superior Court for the State of Washington issued a permanent injunction in the case State of Washington v. Kroger Co. et al (Case No.: 24-2-00977-9 SEA) whereby it enjoined the consummation of the Merger.

As of the date of this filing, the Colorado court has not yet issued a decision.

Following the Company's termination of the Merger Agreement, on December 10, 2024, the Company filed a lawsuit against Kroger in the Court of Chancery in the State of Delaware, bringing claims for willful breach of the Merger Agreement and breach of the covenant of good faith and fair dealing arising from Kroger's failure to exercise "best efforts" and to take "any and all actions" to secure regulatory approval, as was required of Kroger under the terms of the Merger Agreement. The Company is seeking damages in an amount to be determined at trial, in addition to the $600 million termination fee which Kroger is already obligated to pay to the Company under the Merger Agreement.

On December 11, 2024, Kroger delivered a termination notice to the Company, alleging that the Company's December 10, 2024 termination notice was not effective and that Kroger had no obligation to pay the $600 million termination fee because the Company allegedly failed to perform and comply in all material respects with its covenants under the Merger Agreement.