By Tom Hals
WILMINGTON, DEL., Oct 19 (Reuters) - US grocery chain Albertsons Companies will begin making its case in court on Monday for more than $8 billion in damages against larger rival Kroger for allegedly sinking their agreed $24.6 billion merger two years ago.
Idaho-based Albertsons, whose chains include Safeway, Acme and Kings Food Markets, claims that Kroger broke its commitment to obtain regulatory approval for the deal by refusing to sell a sufficient number of stores. As a result, Albertsons said
it is owed a premium of up to $6.88 billion the deal would have delivered to its shareholders, as well as the $600 million termination fee and more than $1 billion in tax adjustments.
The bench trial is scheduled to run two weeks in Delaware's Court of Chancery in front of Vice Chancellor Lori Will. Rulings often take months after the trial ends and the outcome can be appealed to the Delaware Supreme Court.
The 2022 merger was meant to position the two companies and their 5,000 stores to better compete with newer entrants into grocery markets such as Walmart, Costco, Amazon and Aldi.
However, combining the largest and second-largest US grocers was challenged by states and the administration of Democratic President Joe Biden, which argued the deal would remove direct competition and lead to higher prices at checkout.
In December 2024, federal and state courts blocked the deal and Albertsons immediately terminated the merger, which Ohio-based Kroger said cut off its ability to appeal.
Since the termination, Kroger's stock has risen about 4% and Albertsons has lost nearly 30%, both lagging the S&P 500 index, which rose by more than a quarter.
The trial comes a week after Albertsons unveiled a cost-cutting review of its business and after Kroger, which owns the Dillons, Ralphs and Fred Meyer chains, planned to cut 3,000 jobs and invest in technology to lower prices.
Albertsons said that Kroger violated what it claimed was an obligation to take "any and all actions" to get antitrust approval, up to selling 650 stores.
Albertsons described in court papers the various divestiture packages that Kroger offered regulators as an attempt to minimize what it had to sell to protect the profitability of the post-merger business, rather than to get regulatory clearance.
It said Kroger created a $400 million executive bonus pool to encourage senior managers to take a highly aggressive approach to demands from regulators.
Kroger said in its court papers Albertsons was misreading the merger agreement and said that it kept its obligations, pinning the deal failure on regulatory opposition. It said that the Biden administration wanted it to sell more than 650 stores and courts blocked the merger because they took a narrow view of the grocery market by excluding Amazon, Costco and others.
ALBERTSONS CEO COULD BE WITNESS
Kroger spent more than $1 billion and tens of thousands of hours of employee and adviser time trying to close the deal, which it said was evidence it was not willfully breaching the merger agreement.
Kroger said it will prove at the trial that Albertsons isn't entitled to the termination fee because it claims Albertsons undermined Kroger's ability to negotiate. It blamed that in part on allegedly unauthorized communications about the divestment plan by Susan Morris, who is now Albertsons' CEO. Albertsons said there is zero evidence Morris shared sensitive information.
In addition to Morris, other potential witnesses include Rodney McMullen and Vivek Sankaran, who were CEOs of Kroger and Albertsons respectively at the time of the merger but who have since been replaced, according to court documents.
Dozens of other potential witnesses include deal advisers, expert witnesses and current and former executives and directors.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Cynthia Osterman)
