Boise-based Albertsons is seeking more than $8 billion in damages and interest from Kroger after the grocery giants’ proposed $25 billion merger fell apart in 2024.
The two companies recently presented their arguments during a trial in Delaware’s Court of Chancery. Jennifer Kay, a senior correspondent for Bloomberg Law, covered the proceedings and joined Boise State Public Radio’s Morning Edition to discuss the case and what comes next.
The following transcript was generated by software and edited by a human.
Troy Oppie, BSPR: It's Morning Edition on Boise State Public Radio News. Good morning, I'm Troy Oppie. After their nearly $25 billion merger deal fell apart, Boise-based Albertsons sued fellow grocery giant Kroger, blaming Kroger for the deal getting blocked by regulators. Albertsons wants more than $8 billion from Kroger in damages and interest. Kroger has accused Albertsons of working behind the scenes to undermine the deal, leading to its failure. The two sides were in court the last two weeks in October, laying out their case before a Delaware Court of Chancery judge. And we're joined this morning by Jennifer Kay, Senior Correspondent for Bloomberg Law, who covered the trial. Good morning, Jennifer. Thanks for being here.
Jennifer Kay, Bloomberg Law: Good morning.
Oppie: Let's first start with what is the Court of Chancery?
Kay: The Court of Chancery. If you know about it at all, it's because it's the premier M&A dispute venue in the country. Most of the fortune 500 is registered for business here in the state of Delaware. So anytime there's a lawsuit or litigation involving those companies, either between the companies themselves, as in this case, or involving their shareholders. It goes to court in a special business court here in Delaware called the Chancery Court.
Oppie: So in this trial, Albertsons wants billions of dollars in penalties because it says Kroger did not do enough of the right kind of due diligence to satisfy regulators. How did they lay out that argument in court, and who are the witnesses they relied upon to do that?
Kay: So you had the former CEOs of both Albertsons and Kroger testifying. These were the leaders, Vivek Sankaran and Rodney McMullen. They were the two leaders who were kind of guiding the companies through the merger process, and then that merger ultimately failed. They both took the stand and had wildly divergent views of what happened. You also have the current Albertsons CEO testifying during trial. She had been looking to kind of elevate her role at Albertsons at the time through the merger. It didn't quite work out the way she thought it would, but she's ended up as CEO of Albertsons now. And then you also have had all of the antitrust attorneys and the deal counsel, the lawyers who basically helped guide the companies through the merger process, through the regulatory review. They've been on the stand talking about what kind of things they were thinking about as they advised the company.
Oppie: You know, sometimes in court cases, folks watching can get a read on a judge, you know, based on the questions that they're asking, where they might be leaning. Did you get any any sense of how the judge might be interpreting this case during that testimony?
Kay: In Chancery court, it's just the judge. No jury. She's going to make an opinion by herself. And she hasn't asked too many questions throughout trial. And it's been a full ten days of 9-to-5 testimony. But her questions that she has asked have focused really on the technicalities of the divestitures. That was the process where Kroger and Albertsons were proposing to sell off hundreds of stores in order to meet regulatory approval. What the judge, Vice Chancellor Lori Will, has been asking. She's been focused on the methodology for how those stores were selected, how they landed on a certain number of stores in various proposals. She's really kind of gotten into the like economic ratios that were at play.
Oppie: Kroger, for its part, in pretrial filings has accused Albertsons of working to undermine the deal, specifically keying in on then chief operating officer and now CEO of Albertsons, Susan Morris. How did that play out in court?
Kay: The former Kroger CEO, Rodney McMullen, testified that there was a, quote unquote, suspicion that Albertsons was having conversations behind Kroger's back about the divestitures, about the third party that was supposed to be buying those stores, and what Susan Morris's role might have been. Morris, when she took the stand, she said, look, Rodney McMullen had come to her with some vague statements about her having a role in the combined entity once the merger closed, but there were never any specifics about that. So then she was approached by CNS, the company that was supposed to be buying the hundreds of stores that were going to be sold off through the merger. And she liked the idea of that. And CNS came to her with a really solid plan for what she was going to be doing. She was going to be leading the stores that were going to be sold off and really make CNS, which is focused on wholesaling. She was going to be building up its retail presence, and she said, 'yeah, I was talking to them with my personal email through my personal channels, but that's because I didn't think it was proper for me to negotiate an employment contract with them while using my Albertsons contacts.' And she testified that, 'no, I didn't give confidential information about the merger or about Kroger or about Albertson's to this other company.'
Oppie: So what's next for this trial? This is another unique thing about Court of Chancery is that this is not even close to the end of this trial.
Kay: This is a case that's been hanging around since 2024, and it is not going to be over until maybe the midpoint of next year. That's because a trial is really just an opportunity for the judge to hear witness testimony. And then in a couple of months, probably sometime in February, just the attorneys will come back and argue before the judge as to why their witnesses did or did not provide evidence that supports their arguments. And then about three months after that, sometimes longer, that's when the judge will issue her opinion.
Oppie: And if either side doesn't like that opinion, they can appeal to the Delaware State Supreme Court.
Kay: Right, they go right to the state Supreme Court. And so that adds another six months to a year to the process.
Oppie: Jennifer Kay is senior correspondent with Bloomberg Law, covering the Albertsons and Kroger trial over the two companies failed merger. Thanks so much for spending some time with us in Boise this morning.
Kay: Thanks for having me.
