Kroger Faces $8 Billion Tab After Albertsons Merger Collapse

The Delaware Court of Chancery is weighing whether a contractual promise to take “any and all actions” to secure regulatory approval translates into an $8 billion penalty when the deal falls apart. That question sits at the center of a two-week trial that began this week, pitting Albertsons against Kroger over their collapsed $24.6 billion merger.

When Kroger agreed to buy its smaller rival in 2022, it accepted what corporate lawyers call a “hell or high water” clause. Unlike standard merger agreements that require only “reasonable best efforts” to clear antitrust hurdles, this provision obligated Kroger to do whatever was necessary to win approval from regulators, according to pre-trial briefings filed by both companies.

The Federal Trade Commission sued to block the transaction. In December 2024, a federal judge in Oregon granted the FTC’s request for an injunction. On the exact same day, a state judge in Seattle issued a similar ruling in a separate lawsuit brought by Washington’s Attorney General. Albertsons terminated the agreement the following day and immediately filed suit in Delaware.

Albertsons calculates its damages at more than $8 billion. The figure represents the financial fallout of a failed transaction where one party claims the other deliberately engineered the collapse to protect its own balance sheet.

To satisfy the FTC, merging supermarket chains typically divest overlapping locations to a third-party buyer capable of maintaining local competition. Kroger proposed such a package. But Albertsons alleges in its filings that Kroger designed the divestiture strategy backward, first identifying which stores and assets it refused to sell, then offering regulators whatever remained. The courts and the FTC ultimately rejected the proposed spin-off as inadequate to preserve competition.

Financial incentives may have driven that calculation. According to the plaintiff’s pre-trial briefing, senior Kroger executives were eligible for bonuses worth up to six times their base salaries if the merger closed while hitting specific financial return targets. Selling off higher-performing stores would have jeopardized those returns.

Kroger’s defense rests on the argument that the Biden administration’s regulators set an impossible bar. The company spent heavily on legal and advisory fees pursuing approval and maintains it had every economic incentive to close the transaction, according to its pre-trial filings. Kroger intends to argue that political hostility toward consolidation, rather than any contractual breach, killed the deal.

Former Kroger Chairman and CEO Rodney McMullen conceded under oath that the company had agreed to do whatever the contract required, according to Albertsons’ filings. McMullen departed the company during the regulatory fight, officially due to unspecified personal behavior issues. CFO Gary Millerchip left around the same period for a role at Costco. Neither executive’s exit has been fully explained in court documents.

Corporate breakup disputes rarely reach trial in Delaware. Most end in confidential settlements because publicly litigating internal decision-making exposes strategic vulnerabilities to competitors. The fact that Albertsons pushed for a public trial signals confidence that the documentary record — specifically the text of the “any and all actions” clause — favors its position.

The outcome will establish new boundaries for how M&A attorneys draft regulatory commitment clauses. If the court rules that “hell or high water” means exactly what it says, acquiring companies will face vastly increased financial exposure when regulators reject their deals. Future buyers will likely demand stricter limits on divestiture obligations or lower termination fees to offset the risk.