Kroger and Albertsons have already spent more than $1 billion on a merger that may never happen
And if the government squashes the deal, Kroger will owe a $600 million termination fee on top of that.
On its earnings call today, Kroger projected confidence that its merger with Albertsons will actually go through.
No wonder it’s taking that position: if the deal gets squashed, Kroger will have spent hundreds of millions of dollars for nothing. According to a filing from the company today, Kroger has spent $683 million on costs associated with the merger, including bank fees and legal expenses, over the past two years.
Albertson’s, meanwhile, has spent $323 million in that timeframe, bringing the two companies’ combined total to more than $1 billion in costs associated with the deal.
And that’s not all: If the deal doesn’t go through, Kroger would owe Albertson’s another $600 million as a breakup fee.
In 2022, Kroger struck a deal to acquire Albertsons for $24.6 billion. It would be the biggest grocery store merger in American history, in an industry that has consolidated over the past couple decades.
But the Federal Trade Commission has challenged the combination, saying it was anticompetitive and would lead to higher prices for groceries and household essentials. A federal judge will soon decide whether to issue a preliminary injunction hitting the brakes on the merger.
Collectively, Kroger and Albertsons have more than 60 attorneys representing them on the FTC case from white-shoe law firms like Arnold & Porter Kaye Scholer LLP and Williams & Connolly LLP.
On Thursday’s call, Kroger CEO Rodney McMullen projected confidence that the court would rule in the companies’ favor, telling analysts “we remain committed to closing the merger."
When asked about 2025 guidance, McMullen said "we would expect to be in a position of where we've just completed a merger, and we would also need to update where we are relative to the merger and the integration of the merger and those factors as well."
McMullen reportedly said in court that the deal would actually result in lower prices for consumers because consolidation brings down their overall costs of operation. Albertsons CEO Vivek Sankaran said the chain may have to divest stores and lay off workers if the deal doesn't go through.
Albertsons declined to comment. Kroger didn’t immediately respond to a request for comment.
