The proposed $24.6 billion merger between Kroger and Albertsons may have been lost before regulators delivered their final verdict, according to testimony from former Albertsons chief executive Vivek Sankaran, who told a Delaware court that disagreements over store divestitures damaged the deal’s chances from an early stage.
Sankaran testified on Monday, 19 October, as the two US supermarket groups began a legal battle over who should pay for the collapse of their planned combination. His central argument was that Kroger failed to offer a sufficiently ambitious plan for selling stores, undermining the companies’ efforts to convince regulators that the merger would preserve competition.
The dispute now has a substantial financial dimension. Albertsons is seeking approximately $8 billion from Kroger, including a $600 million termination fee and compensation for losses it says its shareholders suffered when the transaction failed. Kroger disputes the claim and maintains that Albertsons is not entitled to the payments it is demanding.
The numbers that exposed the disagreement
According to Sankaran’s testimony, the two companies struggled to agree on how many supermarkets might need to be sold to secure regulatory approval.
Kroger initially wanted to cap its divestiture commitment at between 400 and 450 stores, while Albertsons pushed for a considerably higher limit. They eventually agreed to a maximum of 650 stores.
However, Sankaran said Kroger subsequently proposed that the companies sell just 238 stores to a buyer as part of their initial approach to the Federal Trade Commission (FTC).
That gap between the agreed maximum and the opening offer became a key point in his account of the merger’s failure.
“I was really surprised. Kroger had just gone out and told investors this deal was worth it even at 650” stores, Sankaran testified.
He argued that the proposal was far below what regulators were likely to expect, putting the companies on the wrong footing as they sought approval.
The FTC and several state attorneys general ultimately challenged the merger, asking a federal judge to block it on competition grounds.
A breakdown in trust between the supermarket groups
Sankaran also described difficulties in the relationship between the two companies during the regulatory review. He said he considered antitrust concerns paramount and wanted Kroger to assume the greater regulatory risk while moving more quickly to address the authorities’ objections.
According to his testimony, Kroger retained control of the regulatory strategy but did not respond adequately to Albertsons’ concerns about the pace of progress. Sankaran said communications with then-Kroger chairman and chief executive Rodney McMullen also became more difficult as the process continued.
These disagreements now sit at the centre of the legal case: Albertsons argues that Kroger failed to fulfil its responsibilities under the merger agreement, while Kroger rejects the compensation claim.
ISN analysis: A merger is only as strong as its remedy
For the wider grocery industry, the case highlights a difficult reality of supermarket consolidation. Combining two major retailers may promise purchasing efficiencies, greater scale and investment opportunities, but those benefits count for little if regulators believe the proposed remedies will not protect shoppers.
Selling hundreds of stores is not a simple administrative exercise. The identity of the buyer, the locations involved and the ability of the divested business to compete effectively all matter. A large number on paper does not automatically reassure competition authorities.
The Kroger-Albertsons dispute also raises a commercial question: how much of a proposed merger’s value should a retailer be prepared to sacrifice to win approval? If the parties disagree on that calculation, they risk spending years pursuing a transaction that ultimately delivers neither the promised savings nor the expected growth.
For supermarket operators watching the case, the lesson is clear. Regulatory strategy cannot be treated as a final hurdle after a merger has been agreed. It needs to be built into the deal from the beginning, with both parties aligned on what they are genuinely prepared to give up.
The Delaware proceedings will now examine the competing claims and the extent to which either company bears responsibility for the failed transaction. Whatever the eventual outcome, the dispute could become an important reference point for future consolidation among major US grocers.