Albertsons is seeking more than $9.3 billion in damages from Kroger following the collapse of their proposed $24.6 billion merger, escalating a legal dispute over responsibility for the failure of one of the largest planned combinations in the US grocery industry.
Albertsons outlined its financial demands in documents filed Monday in Delaware Chancery Court, where a two-week trial is expected to begin later this month, according to a report by Quartz.
The requested damages include the additional value Albertsons shareholders would have received had the transaction been completed, along with a $600 million termination payment and approximately $75 million in interest and related expenses.
The dispute centers on whether Kroger fulfilled its contractual responsibility to pursue regulatory approval for the transaction, which would have combined two of the country’s largest supermarket operators.
Albertsons contends that Kroger failed to take sufficient steps to resolve competition concerns raised by regulators, particularly regarding the proposed sale of hundreds of supermarkets to C&S Wholesale Grocers.
In its court filing, Albertsons argued that Kroger was required to address regulatory obstacles to the merger, subject to a contractual provision that did not require the company to divest more than 650 stores.
Albertsons alleges that Kroger maintained an inadequate divestiture strategy despite warnings from regulators and concerns raised by legal and economic advisers, according to Quartz’s account of Bloomberg’s reporting.
The company is asking Delaware Chancery Court Judge Lori Will to determine that Kroger deliberately violated the merger agreement by failing to make the required efforts to secure approval.
Kroger has denied wrongdoing and maintains that it pursued all reasonable options to complete the transaction.
The Cincinnati-based supermarket operator has also accused Albertsons of undermining the proposed divestiture arrangement through its communications with C&S Wholesale Grocers, the company designated to acquire stores as part of the regulatory approval process.
According to Quartz, Kroger alleges that Albertsons worked with C&S in ways intended to encourage regulators to demand additional store sales.
Related: California Seeks Millions in Legal Costs After Blocking Kroger-Albertsons Deal
C&S has disputed suggestions of improper conduct, maintaining that its communications with the companies were consistent with its legal, ethical and contractual responsibilities and were intended to help obtain regulatory clearance.
A Kroger representative did not immediately comment on Monday’s filing, Bloomberg reported.
Antitrust Ruling Triggered Merger Collapse
The legal battle follows a December 2024 federal court decision that prevented the companies from completing their merger.
The Federal Trade Commission had challenged the transaction, arguing that the proposed combination would reduce competition in the grocery sector and that the planned divestitures would not adequately address those concerns.
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A federal judge sided with the FTC, blocking the transaction and effectively ending the companies’ effort to combine their supermarket operations.
Albertsons subsequently terminated the merger agreement and initiated legal proceedings against Kroger, seeking compensation for what it alleges were contractual violations.
The case now places the companies’ respective obligations under the merger agreement at the center of a potentially multibillion-dollar damages dispute.
Shareholders Face Significant Financial Stakes
A successful claim could deliver a substantial financial recovery to Albertsons shareholders, although the outcome and any potential award remain uncertain.
Private equity firm Cerberus Capital Management, which held more than 30% of Albertsons as of late June, is the company’s largest shareholder, according to Quartz.
The litigation also comes as Albertsons faces pressure on its operating performance amid intensifying competition in the U.S. grocery market.
In July, the company lowered its annual sales and earnings forecasts after reporting a significant decline in first-quarter profit. Its shares fell more than 20% following the announcement, according to Quartz.
Albertsons Chief Executive Officer Susan Morris identified Walmart and Amazon as major competitors attracting customers away from the supermarket chain, the publication reported.
The developments underscore the financial challenges facing Albertsons following the termination of a transaction that had been expected to reshape the competitive landscape of the American grocery industry.
For Kroger, the upcoming trial presents the possibility of a substantial financial liability if the court concludes that the company failed to meet its obligations under the merger agreement.
Source: Quartz
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