"I think the company is either broken up or rationalized into a smaller, more profitable and efficient company in the markets where it can excel," said Redwood Technimentals Research analyst Joseph Phillips, who has a "buy" rating on the stock and is based in New York.

The deal may have been hampered by antitrust issues, with some of Supervalu's stores overlapping with Albertsons in certain markets, the Wall Street Journal reported Thursday. The two sides were debating who would accept the risk if the antitrust authorities were to alter or scuttle the deal.

"It was a hairy deal," said Dietze. "It had four different moving parts, so you can imagine the concern. I think $26 became less attractive given the extra risks."

Johnston had been seeking a buyer after competition from lower-priced and upscale stores and a 20-week strike led to profit declines in three of the past four years. Grocers including Safeway Inc. and Whole Foods Markets Inc. have added more prepared and organic foods to win shoppers.

Albertsons has been exiting cities where it doesn't have a No. 1 or No. 2 market share, including New Orleans; Omaha, Neb.; and Jacksonville, Fla. The grocer has 2,500 stores in 37 U.S. states, including Utah.

Wal-Mart, whose revenue from groceries rose to 28 percent of U.S. store sales from 18 percent five years earlier, has encroached on some of Albertsons largest markets. It has opened 327 supercenters, discount stores and Neighborhood Markets in Texas, the third-largest market for Albertsons and Kroger Co., which have 157 and 205 stores there, respectively.

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Contributing: Caroline Salas; Brett Cole