Kroger’s Albertsons Trial Puts $8 Billion in Breach Damages at Issue

By Nathan Brooks

Albertsons could recover more than $8 billion from Kroger over the termination of a $24.6 billion merger, according to the plaintiff’s calculations. The Delaware Court of Chancery began a two-week trial this week to decide whether Kroger breached that agreement.

Kroger agreed to acquire Albertsons for $24.6 billion in 2022. The agreement required it to take “any and all actions” necessary to win approval. Fortune described that duty as far heavier than the customary promise to use reasonable best efforts, which means only that the buyer will try.

On the same day in December 2024, a federal judge in Oregon granted the Federal Trade Commission’s request to block the merger. A Washington state judge in Seattle did the same in a suit brought by Washington’s attorney general. Albertsons terminated the deal and sued Kroger the next day.

Kroger’s lawyers will argue that it spent heavily, retained capable advisers and had every economic incentive to close. They will blame Biden administration regulators for rejecting a plan the company believed would protect competition and consumers. The defense is blunt: “You cannot bill us for the politically motivated actions of others,” Kroger will say.

Kroger disputes whether regulatory opposition excused it from a contract that demanded more than strong effort. Its case therefore asks judges to separate an adverse regulatory outcome from a breach of buyer commitment.

Albertsons will argue that Kroger never chose the assets needed to create a credible new competitor. Instead, Kroger focused on stores and assets it would never sell, leaving any replacement company with the leftovers, according to Albertsons. Albertsons says the courts and the Federal Trade Commission rejected the resulting remedy as inadequate.

A divestiture cannot succeed merely by transferring a set number of stores or isolated assets. It must combine the right stores, private-label products, manufacturing sites and other assets to create a business shoppers would consider viable, according to Fortune’s account.

Former Kroger CEO Rodney McMullen conceded under oath that the company had agreed to do whatever its contract required. That testimony gives Albertsons a direct insider basis for reading the approval clause strictly.

Albertsons also alleges that Kroger’s executive incentives worked against a larger divestiture. Senior leaders could collect bonuses worth as much as six times their base salaries if the merger closed while Kroger delivered targeted financial returns. According to Albertsons, those packages encouraged resistance to selling more valuable stores and assets, even if that resistance cost the deal.

Fortune also highlighted the departures of McMullen and Kroger CFO Gary Millerchip during the approval fight. It said McMullen’s departure was blamed on unspecified personal-behavior issues, while Millerchip’s was tied to a lucrative new job at Costco. McMullen’s actual reason for leaving remained undisclosed, Fortune reported.

The departures may shape courtroom argument, but Fortune said the case remains a contract dispute. It is not a referendum on McMullen’s character, Kroger’s corporate culture or alleged executive greed.

What does this trial change for dealmakers?

For Albertsons, victory could produce an award exceeding $8 billion under the plaintiff’s damages calculation. For Kroger, defeat would convert failed regulatory approval into a costly breach of contract.

The core difference is what counts as a necessary action. Albertsons says Kroger had to surrender valuable stores and other assets to create a viable competitor. Kroger says extensive spending, capable advisers and sustained pursuit of approval met its promise.

A ruling for Albertsons could make an unqualified approval promise more demanding than a standard efforts clause. It could also narrow a buyer’s ability to walk away when regulators demand larger remedies.

A ruling for Kroger would preserve wider room to abandon a deal when required asset sales become too costly. For boards and advisers, the immediate task is to price that remedy risk before signing, rather than discover it after regulators reject the first plan.

Either way, the trial will test promises against conduct: how much a buyer spent, which assets it offered and why it stopped. That is the practical benchmark this $24.6 billion fight could establish for future transactions.