Dive Brief:
- 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 made public on Monday.
- 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 said in an emailed statement.
- Kroger said in its own filing with the court on Monday that 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.
Dive Insight:
The dueling legal briefs from Albertsons and Kroger underscore the vast chasm between the companies’ perspectives on the events that brought them from would-be merger partners to sparring foes.
The companies are preparing to litigate their dispute before a Delaware Court of Chancery judge in a trial set to begin on Oct. 19.
Albertsons claimed that Kroger intentionally breached the companies’ 2022 merger agreement, which stipulated that Kroger would “use best efforts” to resolve “any and all” concerns by regulators that the $24.6 billion deal would be anticompetitive. The transaction collapsed in December 2024.
But instead of taking measures to develop a divestiture plan that would satisfy the Federal Trade Commission, “Kroger worked to protect its bottom line by cherry-picking the more valuable banners and stores for itself,” Albertsons claimed. Kroger’s plan to divest hundreds of stores to C&S Wholesale Grocers was unacceptable to regulators — even though “Kroger’s own antitrust advisors and economists warned Kroger not to take such actions,” Albertsons said in the filing.
“The bottom line is that Kroger made a promise and broke it,” an Albertsons spokesperson said in an emailed statement. “Kroger should be held accountable for the harm it caused our shareholders, associates, and customers – and we look forward to proving our case in court.”
Albertsons said in the filing that in addition to the break-up fee, Kroger’s “willful prioritization of its internal targets” cost Albertsons’ shareholders between $5.43 billion and $6.88 billion in gains they would have earned if the merger had gone through, including interest. In addition to demanding compensation for that “lost merger premium,” Albertsons wants Kroger to pay it between $1.4 billion and $1.7 billion to account for taxes because the payments will not go directly to stockholders.
Albertsons claimed it is also entitled to a minimum of $75 million in prejudgment interest and other fees and costs connected with the break-up fee.
All told, the damages Albertsons is seeking to collect fall in a range of between approximately $7.5 billion and $9.3 billion.
Kroger said in its filing that it went to great lengths to win approval for the merger, noting that “Albertsons’ own witnesses now acknowledge that the deal always remained in Kroger’s near- and long-term financial interests.”
Kroger also said there was nothing that it could have done to overcome the FTC’s opposition to the merger because the agency at the time did not factor retailers like Amazon and Costco into account when evaluating how the deal would impact the grocery market.
Kroger also claimed that Albertsons CEO Susan Morris improperly communicated with C&S about the proposed divestiture plan. That conduct hampered Kroger’s efforts to gain approval for the plan and makes Albertsons ineligible to collect the break-up fee, Kroger said.
In addition, Kroger pushed back on Albertsons’ claim that Kroger intentionally took steps to doom the merger.
“The evidence at trial will not prove Albertsons’ claims that Kroger willfully breached the Merger Agreement,” Kroger said in its filing. “Even if it did, Albertsons cannot prove that any conduct by Kroger caused its alleged damages. And even if it could, the damages Albertsons seeks do not reflect the reasonable expectations of the parties.”.
Even though Kroger is incorporated in Ohio, the dispute is set for trial in Delaware because the companies said in the merger agreement that they would litigate any potential disputes in connection with the transaction in the Delaware Court of Chancery.
