The U.S. Federal Trade Commission sued along with attorneys general from eight states and the District of Columbia. Washington state sued on its own to block the deal. In both of those cases, judges ruled on Tuesday that the deal would unlawfully decrease competition. Colorado had also sued to block the deal.

Kroger defended the proposed combination, saying it would bring prices down at Albertsons 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 data consulting business.

The rulings against the deal are the result of Kroger's unwillingness to listen to regulators' feedback and to sell off assets that would have allowed deal clearance, Albertsons said.

Had the deal proceeded, Kroger would own approximately 5,000 stores across the United States. The companies had argued at trial that selling 579 of the stores, particularly in western U.S. states where Kroger and Albertsons are located near each other, would preserve competition.

U.S. District Judge Adrienne Nelson, who oversaw the FTC case, disagreed, raising doubts that the proposed buyer of the stores, C&S Wholesale Grocers, could become a successful competitor.

Albertsons claims that Kroger rejected stronger candidates for the sale.

Several analysts had predicted a quick termination of the deal and said that Kroger would not appeal the decision to block the deal.

"We are disappointed by the Court's decision, but not surprised, given the narrow view of competition adopted by the FTC and pushback and lawsuits from multiple state attorneys general," Telsey Advisory Group analysts said after the deal was blocked.

Albertsons on Wednesday also said it would bump its quarterly dividend up to 15 cents a share from the current 12 cents a share, and it approved $2 billion in share buybacks, though that includes previously authorized share repurchases.

Separately, Kroger also said its board had approved a new share repurchase program authorizing the buyback of up to $7.5 billion of common stock.

The new repurchase program replaces Kroger's existing $1 billion authorization, which was approved in September 2022, the company said, adding that it intends to enter an accelerated share repurchase agreement of about $5 billion of common stock.

Kroger shares were up 2% in extended trading after the buyback news. Albertsons stock, which has fallen about 20% this year, closed down 1.5% at $18.23 on Wednesday.

(Reporting by Juveria Tabassum, Anuja Bharat Mistry and Aishwarya Venugopal in Bengaluru and Jody Godoy in New York, Additional reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Arun Koyyur, Mark Porter and Pooja Desai)