Albertsons Companies Inc. (NYSE: ACI) began a trial against Kroger Co. (NYSE: KR) on October 19, seeking more than $8 billion in damages over their failed $24.6 billion merger. Albertsons alleges Kroger did not do enough to obtain regulatory approval, while Kroger argues that regulators were responsible for blocking the deal.
Albertsons Companies has taken its legal dispute with Kroger to Delaware’s Court of Chancery, nearly two years after the proposed supermarket merger was blocked by courts over antitrust concerns.
The lawsuit, detailed in a Reuters report, seeks compensation for the lost premium Albertsons shareholders would have received from the transaction, a $600 million termination fee and more than $1 billion in tax-related adjustments.
The proposed $24.6 billion acquisition was announced in 2022 and would have combined two of the largest US supermarket operators. The companies argued that joining forces would help them compete with retailers including Walmart (NYSE: WMT), Costco Wholesale Corp. (NASDAQ: COST) and Amazon.com Inc. (NASDAQ: AMZN).
Federal and state authorities challenged the transaction, arguing that combining the grocery chains would weaken competition and potentially raise prices for consumers. Courts blocked the deal in December 2024, after which Albertsons terminated the merger agreement and filed its lawsuit against Kroger.
Albertsons Says Kroger Failed to Secure Regulatory Approval
Albertsons alleges that Kroger breached its contractual obligations by failing to take sufficient steps to win antitrust approval. The company argues that Kroger should have been prepared to divest as many as 650 stores if necessary to satisfy regulators.
In court filings, Albertsons contends that Kroger’s proposed store-divestiture plans were designed to limit the impact on its own business rather than maximize the chances of regulatory clearance. Albertsons also alleged that Kroger established a $400 million executive bonus pool to encourage management to take an aggressive approach to negotiations with regulators.
Kroger disputes those claims. The company argues that it fulfilled its contractual obligations and that opposition from regulators, rather than its own conduct, caused the merger to fail. Kroger has also challenged Albertsons’ entitlement to the termination fee and filed counterclaims alleging breaches of the merger agreement by Albertsons.
The companies’ SEC filings document the competing claims following the deal’s termination. The trial is scheduled to last about two weeks before Vice Chancellor Lori Will, although a ruling could take months and may be appealed.
Failed Merger Leaves Both Supermarket Chains Facing New Challenges
The court dispute comes as both companies reassess their businesses after the failed transaction. Albertsons recently announced a cost-cutting review, while Kroger has outlined plans to reduce its workforce by 3,000 jobs and invest in technology intended to help lower prices.
The companies’ stock performance has also diverged from the broader market since the merger was terminated. Reuters reported that Kroger shares had risen about 4%, while Albertsons shares had fallen nearly 30%, compared with a gain of more than 25% for the S&P 500 over the same period.
The outcome could have implications beyond the two retailers. The case raises questions about how much effort an acquiring company must make to secure regulatory approval and which party bears the financial consequences when a major transaction is blocked.
For investors following US equity markets, the dispute also highlights the financial risks that can remain after a merger agreement fails to close. The court must determine whether Kroger breached its commitments, whether Albertsons is entitled to the damages it seeks and how responsibility for the failed transaction should be allocated.
Neither the damages sought by Albertsons nor its allegations against Kroger have been established as fact. The case will now turn on the merger agreement, the parties’ actions during the regulatory process and the evidence presented at trial.