American %Grocery store giants %Kroger (NYSE: $KR) and %Albertsons (NYSE: $ACI) say they have agreed to “pause” their proposed $25 billion U.S. merger as it faces increased regulatory scrutiny.
Specifically, the two companies said that they are temporarily putting the merger on hold until a lawsuit filed by the State of Colorado seeking to block the deal is resolved.
A trial related to the Colorado lawsuit is scheduled to begin on September 30 of this year.
Even before the Colorado legal challenge the proposed merger of Kroger and Albertsons faced intense regulatory scrutiny as it would create the second largest grocery retailer in the U.S. after %Walmart (NYSE: $WMT).
The $25 billion U.S. deal would also be the biggest merger in the history of the grocery store industry.
The two companies earlier this year pledged to sell nearly 600 stores across the U.S. to help secure regulatory approval for the merger.
Kroger and Albertsons also agreed to selloff six distribution centers, a dairy plant, certain food brands, and other non-core assets once the merger is completed.
Critics of the deal say the merger is likely to lead to more grocery store closures in the future, particularly in rural areas, and reduce consumers' access to food staples and necessities.
Consumer groups have raised concerns about potential food price increases at a time when people are already struggling with inflation and high interest rates.
Colorado was the second state to sue to block the deal, following a similar move by Washington State in January.
The stock of Kroger has risen 15% so far this year to trade at $53.31 U.S. per share.
Albertsons’ stock had declined 11% on the year and currently trades at $20.38 U.S. a share.
