Chancery Judge Lori Will will determine if Kroger knowingly violated the pact underpinning the $24.6 billion tie-up the grocers announced in 2022. In December 2024, a federal court halted the merger following the US Federal Trade Commission's view that combining over 4,000 locations would hand the companies excessive market power.
Albertsons argues Kroger refused to divest an adequate bundle of stores and related assets to win antitrust clearance, focusing instead on hitting internal profit targets. It is asking for more than $9.3 billion, made up of a $600 million termination fee with interest and costs, along with more than $8 billion it says reflects a lost premium for stockholders and taxes on those gains.
Kroger counters it did everything it could, including spending more than $1 billion to pursue approval and defend the deal in court, and says the transaction could not have been cleared under Lina Khan. Kroger maintains it took reasonable steps and relied on antitrust counsel when shaping divestiture proposals.
To recover damages, Albertsons must show Kroger failed to take the necessary steps to obtain regulatory approval and knew that failure breached the contract. Expect internal communications to be scrutinized. As Monte Mann of Armstrong Teasdale, who is not involved in the case, put it: "what Kroger executives were saying internally, in emails and otherwise, with respect to what they knew, what they were being advised, and why they made the decisions they made, because that's going to tell the judge a great deal about whether this was a failed strategy or it was a knowing breach of bad faith," said Mann.
Albertsons will open the case by calling its former CEO, Vivek Sankaran, to the stand, with Sankaran having served at the helm of the company through the antitrust battle. Ted Hassi, an outside antitrust lawyer to Albertsons, and Tom Moriarty, its chief legal officer who leads mergers and acquisitions, will also testify for the company.
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Albertsons will try to prove Kroger ignored advice from its own antitrust counsel and regulators and stuck to a "failing lowball strategy" to keep higher-value stores and meet return targets, making closing less likely. Kroger will aim to show it relied on counsel, had no motive to sink the deal, and that the termination fee is not owed because Albertsons breached the contract through undisclosed contacts with C&S Wholesale Grocers Inc.
Afterward, Albertsons walked away from the transaction and filed suit against Kroger. Kroger also argues the FTC viewed competition too narrowly by focusing on grocery-only retailers, which would have demanded divestitures well beyond the merger agreement's 650 cap.
Litigation analysts at Bloomberg Intelligence see it as unlikely the court finds Kroger knew it was breaching the agreement, lowering the chance of full damages. They put the odds at 70% that Kroger will owe the $600 million fee for a non-willful breach. A prior example looms large: more than six years ago, Delaware Chancery Judge J. Travis Laster found Cigna breached its $48 billion merger with Anthem but declined to award billions because the deal likely would have been blocked on antitrust grounds anyway.
The ruling could reshape how merger contracts are drafted. Barry Nigro, global co-chair of the antitrust practice at Fried Frank, says the court's take on what "commercially reasonable efforts" means for deals requiring multi-geography divestitures could change how companies write and negotiate these obligations. Kroger argues it owed only reasonable efforts; Albertsons says the bar was higher.
Kroger is the largest US grocer, and Albertsons is No. 2. They pitched the merger as a way to better compete with Amazon and Walmart, while discounters such as Aldi, plus dollar chains and drugstores, pushed deeper into food. Grocery demand has remained firm as families prioritize essentials. Cerberus Capital Management is Albertsons' biggest shareholder.
Since the deal was called off, both companies have named new CEOs and say they plan to invest to help reduce prices, even as they anticipate food inflation will accelerate later this year. Kroger's plans emphasize improved in-store service, expanded e-commerce, and a quicker pace of new store openings, while Albertsons has begun an extensive review of its business. The bottom line: outcomes range from no damages, to only the $600 million fee, to more than $9.3 billion - all material for the balance sheets and for how the next big retail merger gets papered.
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