24.6 Billion Acquisition Dream Shattered! Albertsons (ACI.US) Launches 'After-the-Fact Settlement', Pursues Kroger (KR.US) for $9.3 Billion in Massive Compensation

Odaily noted that nearly two years after the largest supermarket chain merger in U.S. history fell through, Albertsons (ACI.US) and Kroger (KR.US) are about to bring this legal dispute to court. The outcome of this case could impact any large deals facing regulatory antitrust scrutiny.

Both companies' former CEOs are on the witness list for the two-week trial that began Monday in Delaware’s Court of Chancery. The core issue is whether Kroger is to blame for the failure of this $24.6 billion deal. In December 2024, the U.S. Federal Trade Commission (FTC) argued that the merger of 4,000+ stores would give the companies excessive market dominance, and a federal court blocked the transaction.

Albertsons claims that Kroger was unwilling to sell a sufficient number of stores and assets to secure regulatory approval and instead focused on meeting internal profit targets. Kroger counters that it did everything in its power, spending more than $1 billion to advance the deal and fight lawsuits, but the merger was doomed under then-FTC Chair Lina Khan.

Monty Mann, a partner at Armstrong Teasdale law firm, stated that a key point in the trial is "what Kroger executives knew, were advised, and the rationale for their decisions as shown in emails and other internal communications. Because this will make clear to the judge whether this was simply a failed strategy or a willful breach of contract." Mann is not involved in the case.

$9.3 Billion in Damages

The arguments will be presented to Delaware Court of Chancery Judge Lori Will, who will decide whether Kroger willfully breached the merger agreement. Albertsons is seeking over $9.3 billion from Kroger, including a $600 million termination fee with interest and fees, as well as more than $8 billion—which Albertsons claims represents the premium lost to shareholders from the failed transaction, plus related tax liabilities.

Albertsons’ largest shareholder is private equity firm Cerberus Capital Management. It is expected to first question the company's former CEO Vivek Sankaran, who led the company during the antitrust battle. External counsel Ted Hassi, who advised on antitrust matters for the merger, and Tom Moriarty, the general counsel and head of M&A, will also testify for Albertsons.

Other key witnesses expected to testify earlier this week include former Kroger CEO Rodney McMullen—who resigned in March 2025 following a board investigation into his personal conduct—and Arnold & Porter attorney Michael Bernstein, who provided Kroger with antitrust advice.

Kroger, the largest U.S. supermarket chain, and second-ranked Albertsons announced their merger plan in 2022, describing the move as a strategy to better compete with rivals such as Amazon and Walmart. Discount grocers like Aldi have become popular with their no-frills model, while dollar stores and pharmacies have expanded their food selections to attract more customers. Meanwhile, grocery demand remains steady as families prioritize essentials when managing expenses.

Divestiture Plan

Kroger and Albertsons agreed to sell hundreds of stores to C&S Wholesale Grocers to gain regulatory approval for the proposed merger. However, after a federal judge sided with the FTC and found the divestiture plan inadequate, the deal was halted. Albertsons then terminated the agreement and sued Kroger.

To win damages, Albertsons must prove that Kroger violated the merger agreement by failing to take necessary actions for regulatory approval—and that Kroger knew it was in breach.

During the trial, Albertsons will attempt to show that Kroger ignored advice from its own antitrust lawyers and regulators, persisting in a “failed low-price strategy”—meaning Kroger prioritized retaining higher-value stores to meet financial targets over taking necessary actions for antitrust clearance, even if this conflicted with its financial interests. Albertsons will also aim to demonstrate that Kroger’s alleged breach reduced the likelihood of the deal closing.

Kroger, on its part, will seek to prove that it relied on antitrust counsel’s guidance when crafting the divestiture plan and had no motivation to let the deal fail.

Termination Fee

Bloomberg Intelligence’s litigation analysts forecast that Kroger will likely not be liable for damages, as the judge is unlikely to find that the supermarket chain knowingly breached the merger agreement. But they estimate Kroger has a 70% chance of having to pay a $600 million termination fee for a “non-willful breach.”

Kroger argues it should not have to pay the termination fee, alleging that Albertsons violated the merger agreement by undermining its regulatory efforts through secret communications with C&S.

Barry Nigro, global antitrust co-chair at Fried Frank, commented that the judge’s decision in the Albertsons vs. Kroger case could affect future deals. Nigro said depending on how the court interprets the concept of “commercially reasonable efforts”—especially for deals involving divestitures across various regions—companies may reconsider how they draft merger agreements.

Kroger contends it complied with the agreement using “reasonable” efforts, while Albertsons says Kroger should have done more than just be “reasonable.”

The last highly publicized legal battle over antitrust-related deal failure was more than six years ago—when the $48 billion merger between Cigna and Anthem was called off. In that case, Delaware's Court of Chancery judge Travis Laster found Cigna had breached the merger agreement but declined to award billions in damages, as the deal was already likely doomed for antitrust reasons.

This logic similarly underpins Kroger’s defense. Kroger’s lawyers argue that the FTC’s focus on pure-play grocery retailers meant its perspective on competition was narrower than Kroger’s or Albertsons’, which would have required Kroger to sell far more stores than the 650-store cap set in the merger agreement.

Since the transaction was called off, both Kroger and Albertsons have named new CEOs. Both companies say they plan to increase investments to help lower prices, while acknowledging that food inflation may rise later this year. Kroger is also focusing on enhancing in-store services, expanding e-commerce, and accelerating new store openings, while Albertsons has launched a comprehensive business review.