The collapse of a proposed $24.6 billion supermarket merger has brought two of America’s biggest grocery chains into a high-stakes courtroom battle, with Albertsons seeking more than $8 billion in damages from Kroger.
The trial, which began in Delaware’s Court of Chancery, centres on whether Kroger did enough to secure regulatory approval for the deal or failed to meet its contractual commitments by refusing to divest enough stores.
Albertsons, the Idaho-based operator of Safeway, Acme and Kings Food Markets, argues that Kroger did not make the necessary concessions to overcome antitrust objections. The company says the failed transaction cost its shareholders a substantial financial premium and triggered additional losses for which Kroger should be held responsible.
Its claim includes as much as $6.88 billion in lost shareholder value, a $600 million termination fee and more than $1 billion in tax-related adjustments.
The two-week bench trial will be heard by Vice Chancellor Lori Will. A final decision could take several months after proceedings conclude, and either side may appeal the ruling to the Delaware Supreme Court.
A Merger Designed to Challenge Retail Giants
Announced in 2022, the merger was intended to bring together roughly 5,000 stores under a single corporate structure, giving the supermarket chains greater scale to compete against powerful rivals such as Walmart, Costco, Amazon and Aldi.
But the proposed combination quickly attracted opposition from state authorities and the administration of then-President Joe Biden. Regulators argued that joining the country’s two largest and second-largest traditional grocery operators would weaken competition in numerous markets, potentially leaving consumers with fewer choices and higher grocery bills.
Federal and state courts blocked the transaction in December 2024. Albertsons subsequently terminated the agreement, while Kroger maintained that the decision deprived it of an opportunity to challenge the ruling through an appeal.
The failed deal has also left a mark on both companies’ market performance. Since the breakup, Kroger shares have gained approximately 4%, while Albertsons stock has fallen close to 30%. Both have underperformed the broader S&P 500 index, which has advanced by more than 25% over the same period.
The legal fight arrives as both retailers face pressure to improve their businesses. Albertsons recently announced a review focused on reducing costs, while Kroger has outlined plans to eliminate around 3,000 jobs over three years and increase technology investments as part of efforts to lower prices.
Albertsons Accuses Kroger of Holding Back on Store Sales
At the heart of Albertsons’ lawsuit is the merger agreement’s requirement that Kroger take extensive steps to obtain antitrust clearance, including selling stores if necessary.
Albertsons contends that Kroger was obligated to take virtually every available measure to win approval, even if that meant divesting as many as 650 locations.
According to Albertsons, Kroger’s proposed store-sale packages were structured primarily to protect the profitability of the combined company rather than satisfy regulators’ concerns. It alleges that Kroger sought to limit the number of locations it would surrender, undermining the prospects of securing approval.
Albertsons has also pointed to a $400 million pool of executive bonuses allegedly created to encourage senior managers to pursue an aggressive negotiating strategy in response to regulatory demands.
Kroger rejects that account. It argues that Albertsons is interpreting the merger agreement incorrectly and insists that it fulfilled its contractual responsibilities. The company maintains that the transaction failed because regulators opposed the combination, not because Kroger deliberately obstructed the approval process.
Kroger also disputes the way authorities assessed competition in the grocery industry. It argues that regulators and the courts adopted an overly narrow definition of the market by failing to give sufficient weight to competitors such as Amazon and Costco.
The company says the Biden administration demanded divestitures involving more than 650 stores, a requirement it viewed as excessive.
Kroger Points to More Than $1 Billion in Merger Costs
Kroger plans to use its substantial investment in the proposed acquisition to challenge allegations that it deliberately failed to deliver the deal.
The company says it spent more than $1 billion on the transaction, alongside tens of thousands of hours contributed by employees and advisers. Kroger argues that this level of financial and operational commitment is inconsistent with Albertsons’ claim that it intentionally breached the agreement.
The termination fee is another major point of contention. Kroger says Albertsons should not receive the payment because, in its view, the company itself interfered with efforts to negotiate a workable divestiture arrangement.
One allegation concerns communications involving Susan Morris, who now leads Albertsons and was involved in the company during the merger process. Kroger claims certain communications about the proposed store-sale plan were unauthorized and weakened its negotiating position.
Albertsons has rejected the accusation, arguing that there is no evidence Morris disclosed confidential information.
Former Executives Could Take the Stand
The proceedings could bring several prominent figures from the failed merger negotiations into the witness box.
Potential witnesses include Morris, former Kroger chief executive Rodney McMullen and former Albertsons CEO Vivek Sankaran. Both former chief executives have since been replaced.
Other witnesses could include executives and directors from both companies, transaction advisers and experts expected to address the financial and regulatory issues surrounding the deal.
The outcome could determine whether Albertsons receives billions of dollars in compensation for the merger’s collapse or whether Kroger successfully defends its handling of the agreement.
Beyond the immediate financial stakes, the case offers a close examination of how much effort an acquiring company must make to overcome regulatory opposition — and where contractual obligations end when government authorities ultimately block a major corporate transaction.
