(Reuters) -Albertsons ( ACI ) on Wednesday terminated its $25 billion bid to merge with Kroger ( KR ) after courts blocked the deal and sued its rival, alleging a breach of contract that led to the deal's demise.

The formal termination ends a two-year long effort by the chains to combine that regulators argued would lead to higher prices for shoppers. Albertsons ( ACI ) said it was suing due to Kroger's ( KR ) failure to take "any and all actions" to get the deal approved.

Albertsons ( ACI ) is seeking billions of dollars in damages along with the $600 million termination fee. Kroger ( KR ) did not immediately respond to a request for comment on the lawsuit.

"Given the recent federal and state court decisions to block our proposed merger with Kroger ( KR ), we have made the difficult decision to terminate the merger agreement," Albertsons ( ACI ) CEO Vivek Sankaran said.

Two different courts blocked the deal on Tuesday, siding with the Federal Trade Commission, which moved to stop the deal, and argued in a trial that the merger would eliminate competition between the traditional grocery chains, causing higher prices and reducing leverage for unionized workers.

The deal became a symbol of surging grocery costs. U.S. food prices have risen by 25% over the last four years, and while food inflation is showing signs of cooling in 2024, grocery bills remain a concern for shoppers.

The FTC sued along with attorneys general from eight states and the District of Columbia. Colorado, like Washington, sued on its own to block the deal.

Kroger ( KR ) defended the proposed combination, saying it would bring prices down at Albertsons ( ACI ) stores, where it said prices are 10-12% higher than its own. The merged company would fund price cuts through cost savings it expects from a larger operation, and a larger customer base to drive revenue for Kroger's ( KR ) data consulting business.

Albertsons ( ACI ) shares were up 1.5% in premarket trading Wednesday, while Kroger ( KR ) was marginally lower.

(Reporting by Juveria Tabassum in Bengaluru; Editing by Arun Koyyur)