Usually, when a breakup occurs before a marriage, there’s very little in the way of shared assets to argue over. In some cases, there might be joint property or a contested engagement ring, but it’s a breakup, not a divorce, so the stakes are usually lower.
In the case of Kroger and Albertsons, however, the end of the two grocery chains’ potential merger has huge financial implications.
Albertsons is seeking to collect approximately $8 billion in damages from Kroger stemming from the companies’ unsuccessful effort to merge, Albertsons revealed in a Delaware Court of Chancery filing.
“The sum Albertsons is demanding includes a $600 million break-up fee as well as compensation for shareholder losses suffered because the deal fell through due to Kroger’s failure ‘to work with Albertsons in good faith,'” an Albertsons spokesperson shared in an emailed statement to Grocery Dive.
Kroger answered with its own court filing saying Albertsons “is not entitled to the break-up fee or other damages it seeks, in part because its conduct undermined Kroger’s effort to win regulatory approval for the deal.”
With the case heading to court on Oct. 19, Monte Mann, a business litigation partner and nationally recognized trial lawyer at law firm Armstrong Teasdale, answered TheStreet’s questions about the case.
He noted that “even if Albertsons establishes a breach, proving that Kroger’s conduct caused $8 billion in losses is another substantial hurdle, especially given the antitrust opposition to the transaction.”
Kroger and Albertsons merger plans were killed in 2024
Kroger and Albertsons tried to merge in 2022, but the deal fell apart on antitrust concerns in 2024, the Associated Press reported.
The merger would have created one of the largest grocery chains in the U.S., which the Federal Trade Commission (FTC) said would have eliminated competition and increased prices for millions of Americans.
Mann said that the court case revolves around Kroger’s contractual obligations.
“There’s a big difference between promising to use your best efforts to get a deal approved and guaranteeing that the deal will close. Kroger didn’t necessarily have to succeed in getting regulatory approval. But it did have to live up to whatever commitments it made in the merger agreement. That’s where I’d expect much of the fight to be,” he told TheStreet.
He’s curious to see what the case reveals about what each company was doing during the attempted merger.
“What interests me most is what was happening behind the scenes once the regulatory problems became apparent. Albertsons claims Kroger was more interested in protecting its own financial targets than getting the deal approved,” he wrote.
“The allegations about the executive bonuses and the rejected $800 million concession are particularly interesting. But allegations are one thing. What the documents and witnesses actually establish is another.”
(Albertsons filing highlights a $400 million executive incentive plan tied to post-merger integration. Albertsons further claims that in September 2024 it offered to cut the merger price by more than $800 million to pay for a stronger [divestiture] package. The brief alleges that Kroger’s CEO did not present that proposal to Kroger’s board, Abasto.com reported.)
The Kroger/Albertsons decision may change mergers
Mann thinks this case could set a legal precedent.
“This case should get the attention of anyone involved in a major acquisition. When you sign a merger agreement, you’re not just agreeing on a price. You’re also deciding who bears the risk if regulators object and what each side has to do to get the deal across the finish line. Those provisions can seem like boilerplate until the deal falls apart. Then they can be worth billions,” he shared.
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One of the key issues is whether Kroger actually did anything wrong.
“Just because a merger fails doesn’t mean somebody breached the agreement. Regulators can block a deal even when both sides do everything they’re supposed to do. But if one party contributed to the failure by not honoring its commitments, that’s a different story. The question here is whether Kroger did what it promised to do, and if not, whether that made a difference,” Mann shared with TheStreet.
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The Kroger Albertsons case may not go to verdict
Both grocery chains own several well-known brands. Kroger, for example, operates Fry’s, Kroger, Harris Teeter, Fred Meyer, and others. Albertsons’ banners include Albertsons, Safeway, Pavilions, and Vons.
The merger would have resulted in a combined store count of more than 5,000, including 700,000 employees.
Mann thinks that there’s a chance the case does not make it to a verdict.
“I wouldn’t be surprised if they settle. These are sophisticated companies with good lawyers on both sides. They know the risks, and they know what this litigation is costing them. At some point, it becomes a business decision. Can they find a number they can both live with?” he wrote.
Mann does not see a favorite heading into the trial.
“Neither side has a slam dunk here. Albertsons has some real arguments, but proving that Kroger is responsible for the deal falling apart is no small task. And Kroger has its own problems to deal with. That’s usually a pretty good recipe for a settlement,” he added.
Still, the fact that the dispute has gone this far means that both grocery chains may fight it out to a verdict, but he thinks it’s unlikely.
“I’ve seen plenty of cases where everyone says they’re ready to go to trial, and they mean it. But as you get closer, the risks start to look a lot more real. Nobody wants to leave billions of dollars to chance. I wouldn’t be shocked if this gets resolved at the eleventh hour,” Mann wrote.
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