A Colorado judge issued an order temporarily blocking the proposed $25 billion merger between Kroger and Albertsons following a lawsuit from the state, according to court documents.

Kroger is the parent company of King Soopers in Colorado, while Albertsons runs the Safeway chain in the state.

At a hearing in Denver on Thursday, Judge Andrew J. Luxen granted a preliminary injunction halting the deal and canceled a hearing set for Aug. 12.

“Defendants shall take any and all necessary steps to prevent any of their officers, directors, domestic or foreign agents, divisions, subsidiaries, affiliates, partnerships, or joint ventures from consummating, directly or indirectly, any such transaction,” the court ruling said.

Luxen will now oversee a two-week trial on the merits of the proposed merger beginning on Sept. 30, and the two companies agreed to delay closing their proposed deal until after the court rules, the court documents showed. 

A Kroger spokesperson said in an email that the decision is “welcome news” because the court will skip the hearing and go straight to trial. 

“We look forward to defending in court how the combination of Kroger and Albertsons will provide meaningful, measurable benefits, including lower prices and more choices for families across the country and more opportunities for stable, well-paying union jobs,” the spokesperson said.

Kroger faces one of its most difficult legal hurdles in getting the $24.6 billion deal closed in Colorado.

Colorado was the second state, after Washington, to sue against the merger. Shortly after, the FTC filed its own suit with eight other states: Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming.

While most states are part of the federal lawsuit, Kroger and Albertsons will also have to get through Colorado’s local court system.

The grocers announced in April it would sell nearly 100 Albertsons stores, which is most of its stores in Colorado, to C&S Wholesale Grocers to help the merger go through. Nationally, the grocers plan to divest nearly 600 stores.

Why Colorado Safeway stores wouldn't be run by Kroger if merger goes through

The rights to the Safeway brand name would also go to C&S Wholesale Grocers in Arizona and Colorado alone.

Colorado’s attorney general’s office said it is concerned the merger would eliminate grocery competition and the planned divestitures to a grocer with no stores in the West would lead to closures. The grocers maintained the merger would not shut down stores, it would reduce food prices and C&S Wholesale Grocers is experienced enough to operate grocery stores.

Kroger and Albertsons said the merger would help them compete against the rise of supermarkets and online shopping giants, such as Walmart and Amazon.

The grocers originally tried to dismiss Colorado’s lawsuit, arguing it was redundant since the Federal Trade Commission is also suing against their merger. A Denver District Court disagreed, ruling that the state has as much right to enforce monopoly laws as federal officials do.

After Kroger and Albertsons failed to get local courts to drop the case, the ruling said the grocers agreed with the state to place a preliminary injunction to save on resources.

In a statement, Colorado Attorney General Phil Weiser, who pursued the state’s lawsuit against the merger, lauded the court’s ruling. 

“I am pleased that Kroger and Albertsons agreed to halt their plans to merge until the court rules on the state’s lawsuit to permanently block the grocery merger,” Weiser said.

“This is great news for shoppers, workers, farmers, and other suppliers, who can rest assured that this mega-merger will not go into effect during harvest season and while kids are headed back to school,” he said.

The potential new owner, if the deal goes through, would be New Hampshire-based C&S Wholesale Grocers, parent company of Piggly Wiggly and Grand Union Supermarkets. Kroger and Albertsons plan to divest 91 stores across the state, nearly all of Albertsons’ 105 stores, to the company.

The plan would introduce a new grocer into the Colorado market that has no experience operating a retail footprint in the state. Weiser had expressed worries about that when he announced his office would sue to block the merger, while the Kroger and Albertsons have expressed confidence in C&S Wholesale Grocers.

In a video conference last month, an Albertsons consultant spoke to discuss the effects of the plan.

“To correct mistakes by some prior divestiture buyers,” said Scott Moses, “they’re either buying or licensing local banners to make sure they maintain customer continuity, loyalty and performance.”

Moses, the head of grocery, pharmacy and restaurants investment banking at Solomon Partners, was hired by the grocer as a third-party expert on the effects of the deal. 

The attorney general’s concerns begin with the 2015 deal that put the Safeway brand into Albertsons’ possession in the first place.

Albertsons had to divest 168 stores to get the Federal Trade Commission’s approval. Haggen bought the stores and went bankrupt months after the sale, only for Albertsons to buy many locations back. The divestitures didn’t happen in Colorado, though Weiser’s office said the state saw the effects of store closures from that merger, which the attorney general said left some local communities with fewer grocery options.

One key difference from Haggen’s takeover of divested stores and the proposed Kroger-Albertsons plan is that the former was a much smaller chain putting its name on stores in states where customers had little knowledge of the brand, Moses said.

And the grocer didn’t have enough money to market itself.

“As a consequence, customers were confused,” Moses said.

And sales fell quickly.

C&S Wholesalers is keeping the Safeway name in Colorado and Arizona because the brand has strong loyalty in the state, Moses said.

And while C&S Wholesalers doesn’t operate stores in Colorado and most of the Western states where divestitures are happening, Moses said, it has a national supply chain, giving it more structure to be sustainable in new markets.

Reuters contributed to this report.