Grocery Goliaths’ Merger Slayed by Antitrust Davids: The Kroger – Albertsons Deal Postmortem
Key Insights:
Kroger’s $25-billion bid to acquire Albertsons aimed to create one of the largest grocery chains in the U.S
States, regulators, and union workers pushed back, fearing store closures, layoffs, and higher prices
Multiple lawsuits piled up, including challenges to a $4 billion special dividend and the merger’s legality
Proposed store divestitures and the SpinCo plan failed to appease antitrust concerns
Federal and state court rulings ultimately blocked the deal, prompting Albertsons to terminate and sue Kroger
For folks who would prefer not to read this full deal postmortem, we have included key insights at the top, key learnings at the bottom and also a Google NotebookLLM generated podcast of this article below.
Introduction:
When we first started our Deal Postmortem series, we expected to write about failed mergers & acquisitions once or twice a year at most. Major mergers & acquisitions rarely fail on such a grand stage. Yet, with 2024 coming to a close, we found ourselves looking at another new—and quite dramatic—failed deal. This time, it involved two of America’s biggest supermarket chains: The Kroger Company and Albertsons Companies. On paper, it seemed like a transaction that would create one of the largest grocery operators in the nation, with immense buying power and a sprawling national footprint. However, after holding out hope for two years, the deal collapsed under the weight of antitrust concerns, union backlash, multiple lawsuits, opposition from certain states and ultimately, a federal court decision. The following is a detailed chronology of how the $25-billion attempt by Kroger to buy Albertsons unraveled.
The Merger
Initial Announcement and Deal Terms
The idea for what would become a huge deal started in late 2022 when Kroger, one of the biggest grocery retailers in the U.S., announced its plan to buy Albertsons for $24.6 billion. Under the original terms, Albertsons’ shareholders were set to receive $34.10 per share in cash. However, Albertsons also planned to spin off a standalone public company, “SpinCo,” at the time of closing, and the cash component of the $34.10 per share would be reduced by whatever per-share value SpinCo held.
Albertsons had also intended to pay out a special dividend of up to $4 billion to its shareholders, effectively estimated at around $6.85 per share, further reducing the cash they would receive at closing. This structure of the deal caught the attention of regulatory authorities and lawmakers almost immediately.
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Early Warning Signs
Senate Antitrust Panel and Senator Warren Weigh In
The companies had held hopes of closing the merger in early 2024 and were ready to divest assets to gain the regulatory approvals required for the merger. But despite the initial optimism, it didn’t take long for concerns to surface. Just a few days after the merger announcement, a U.S. Senate antitrust panel announced it would hold a hearing to examine the proposed merger of these grocery giants. Senator Elizabeth Warren quickly followed suit, calling on the Federal Trade Commission (FTC) to block the acquisition.
Unionized Workers Speak Out
Almost immediately, waves of opposition came in from unionized retail workers from coast to coast. They began lobbying regulators and lawmakers, urging them to investigate—and ultimately nix—the Kroger-Albertsons merger.
“There is no way that this is going to be good for workers,” said Maggie Breshears, who worked at a Kroger-owned Fred Meyer in Seattle, highlighting the skepticism many employees felt. Four local chapters of the United Food and Commercial Workers (UFCW) International, representing over 100,000 Kroger and Albertsons workers, began discussing possible strikes and coordinated lobbying efforts.
These workers feared potential store closures, layoffs, and eroded wages, particularly in markets where competition might be reduced from two major players to one. Others were troubled by the possibility that money would be spent on gobbling up competition rather than lowering prices or improving wages.
Possible Remedies
Anticipating a surge of antitrust scrutiny, Kroger and Albertsons initially proposed selling up to 650 stores to address competition concerns. Beyond this, Albertsons had created “SpinCo” to house a specific subset of stores that could be spun off as a separate company if regulators required further concessions.
However, workers and unions remained wary. Past high-profile divestitures in grocery mergers had mixed track records, sometimes leading to the sale of stores to less stable chains, which ultimately closed or downsized. The fear was that even if Kroger and Albertsons sold off certain stores, employees might lose their jobs if those stores weren’t viable under the new owners.
The Multiple Lawsuits
The Fight Over the $4 Billion Special Dividend
In rapid succession, state attorney generals began to investigate the deal. Washington, D.C.’s Attorney General Karl Racine led a bipartisan group urging Albertsons to hold off on a planned $4 billion dividend to shareholders, arguing it would weaken the company’s balance sheet before the merger was fully reviewed. The logic was that if regulators ended up blocking the deal, Albertsons would need substantial cash reserves to remain competitive.
Washington State Attorney General Bob Ferguson soon filed a lawsuit to block the special dividend payment, fearing that distributing billions in cash ahead of the merger would leave Albertsons financially handicapped. The dividend had been in the works before merger talks, but the attorney generals argued the timing was suspiciously close to the new deal announcement.
States Band Together
Over the next few months, multiple states joined the fray. Colorado’s attorney general sought to block the same dividend, and while a Washington State Court initially denied a request for a preliminary injunction to prevent the payout, attorneys general from California, Illinois, and Washington, D.C., announced plans to appeal a federal court’s refusal to halt the $4 billion dividend. A temporary restraining order (TRO) initially put the dividend on hold, but by January 2023, the TRO was lifted.
Still, the controversies around the dividend underscored widespread concern among state officials that Kroger’s takeover could pose broad economic and antitrust risks. Soon, other lawsuits emerged directly challenging the merger’s legality.
Private Lawsuits and Union Opposition
Private lawsuits also materialized, including one in California aiming to stop Kroger’s planned takeover. Meanwhile, Arizona’s Attorney General Kris Mayes launched an antitrust investigation of the deal. Then came the formal opposition from the International Brotherhood of Teamsters, representing more than 22,000 members across Kroger and Albertsons’ stores, distribution centers, and manufacturing plants. By mid-2023, Teamsters had officially thrown their weight behind blocking the merger.
Mounting Pressure from the Secretaries of State
By August 2023, the opposition had grown beyond unions and attorney generals. Secretaries of State from seven states—Colorado, Arizona, Vermont, Minnesota, Rhode Island, Maine, and New Mexico—co-signed a letter to FTC Chair Lina Khan urging the agency to block Kroger’s acquisition of Albertsons. Collectively, these states housed nearly 5,000 stores that would be impacted.
In September 2023, Kroger attempted to ease concerns, announcing an agreement to sell 413 stores to C&S Wholesale Grocers. This move was part of a broader divestiture strategy aimed at winning antitrust approval, but it failed to quell fears in many quarters. California Attorney General Rob Bonta signaled that the state might block the deal out of concern for consumers and workers, and the Teamsters insisted that selling stores to C&S did not eliminate the potential negative impacts on grocery employees’ bargaining power and wages.
Cracks in the Foundation: More Lawsuits and Political Backlash
Heightened Scrutiny from Lawmakers
Toward the end of 2023, a group of six U.S. lawmakers—Senators Elizabeth Warren, Mazie Hirono, Bernie Sanders, and Cory Booker, along with Representatives Summer Lee and Alexandria Ocasio-Cortez—submitted a letter to the FTC signaling their opposition. Their argument echoed the recurring theme: reduced competition would likely raise prices on everyday consumer goods while harming unionized workers.
New Legal Filings in Washington and Colorado
Early in 2024, Washington State Attorney General Bob Ferguson brought a lawsuit against Kroger and Albertsons, claiming the $25-billion merger would harm consumers and raise prices. The following month, Colorado Attorney General Phil Weiser did the same. Weiser called Kroger’s plans to divest 400 stores to C&S Wholesalers “unpersuasive”.
The Final Nail: The FTC and State Lawsuits
FTC Takes a Stand
The Federal Trade Commission (FTC) formally sued to block the deal in federal court in Oregon, asserting that the acquisition would likely lead to higher food prices and undermine union workers’ bargaining power. The FTC argued that the companies’ proposed fix—selling hundreds of stores across Washington, Colorado, and other states—would not solve the overarching competition problem.
“Kroger’s acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today,” said Henry Liu, director of the FTC’s Bureau of Competition.
Detailed Divestiture List and Job Uncertainty
Kroger tried to provide further clarity in July 2024 by releasing a comprehensive list of 124 stores in Washington state, 101 in Arizona, 91 in Colorado, and 63 in California, among others, plus one dairy plant and multiple distribution centers they planned to divest to secure regulatory approval. Kroger CEO Rodney McMullen sent a memo to employees, assuring them that they would remain Kroger or Albertsons staff until the transaction closed, at which point they would become employees of C&S.
However, this step did not significantly reduce the mounting opposition. A Colorado judge soon issued an order temporarily blocking the proposed merger, granting a preliminary injunction that set the stage for a longer trial set to begin on September 30, 2024.
Colliding in Court: Constitutional Arguments and CEOs on the Stand
Kroger’s Motion Against the FTC
In response to the FTC’s administrative challenge, Kroger filed a motion in federal court contending that the FTC’s process was unconstitutional—claiming it violated Article II (regarding the President’s inability to remove the administrative judge) and Article III (by trying the case outside the independent court system). Kroger further accused the FTC of “splitting the case” into separate legal venues to increase the chances of obtaining an injunction.
Kroger publicly insisted that the merger was intended to lower prices and protect union jobs, urging that only a federal court should pass judgment on the deal’s legality.
Albertsons’ Dire Warnings: “We Might Not Survive Alone”
As the trials got underway, Albertsons’ Chief Executive Vivek Sankaran testified that the chain would be forced to consider closing stores or laying off workers if the deal fell through. He emphasized that while Albertsons remained financially sound for the moment, growing costs, fierce competition, and challenging economic pressures could force the company to seek another buyer within two to three years.
“The grocery business is a zero-sum game in America,” Sankaran declared, underlining how tight profit margins and intense competition put tremendous pressure on operators to consolidate or face hard choices.
The Three Simultaneous Trials
By late August and early September 2024, three key legal battles were unfolding nearly in parallel:
Federal Court in Oregon: Where the FTC and a coalition of states including Washington, Colorado, and others argued their case before a U.S. District Court judge.
State Court in Washington: Attorney General Bob Ferguson’s lawsuit contended the merger would harm consumers, possibly facilitate store closures, and erode union bargaining power.
Denver District Court in Colorado: Where Attorney General Phil Weiser’s team not only argued that the proposed 579-store divestiture to C&S Wholesale Grocers was “inadequate” but also accused the grocers of violating state antitrust laws by agreeing not to poach each other’s workers or solicit pharmacy customers during a Kroger worker strike in 2022.
All three trials saw overlapping themes: anticipated price hikes, reduced choice for consumers, and weakening of union bargaining leverage due to diminished competition. In each of these courts, the two companies tried to defend the deal by citing cost synergies, improved buying power, and their “essential” need for consolidation to remain competitive against the likes of Walmart (WMT), Amazon (AMZN), and Costco (COST).
Climax in Court: Closing Arguments and Judicial Rulings
Washington, Colorado, and Oregon Wrapping Up
In October 2024, the dual trials in Washington and Colorado began winding down. Closing arguments in Washington highlighted how nearly half of that state’s grocery market would be under one banner if the merger went ahead. The Colorado case also ended with the state’s lawyers telling the judge, “Watch what they do, not what they say,” to argue that Kroger and Albertsons’ public assurances were hollow. Both judges planned to rule in November.
Meanwhile, in Oregon, the federal court hearing the FTC’s challenge was in its final stages. The tension was palpable: if the federal court found the merger would seriously harm competition, it could deal a decisive blow to the entire endeavor.
The Judicial Hammer Falls
In December, the first major ruling landed. A U.S. District Court Judge in Oregon blocked the merger, siding with the FTC. The judge concluded that combining the two largest traditional grocery chains would substantially reduce competition, likely leading to higher prices and reduced bargaining leverage for union workers.
Within days, a Washington state court judge also ruled to block the merger in the state’s separate suit, reinforcing that the deal was indeed anti-competitive. With these two legal setbacks, there was little hope left for Kroger and Albertsons to salvage their merger.
The Aftermath: Termination and New Lawsuits
Albertsons Terminates the Deal
Following the court rulings, Kroger and Albertsons announced they were terminating their merger agreement. The legal stakes climbed further when Albertsons filed a lawsuit in the Delaware Court of Chancery, accusing Kroger of breaking the contract by not exercising “best efforts” to secure regulatory approval. Albertsons claimed Kroger had ignored feedback from regulators, turned down better offers for store divestitures, and otherwise failed to work collaboratively under the terms of the agreement.
The details of Albertsons’ complaint remained temporarily sealed, but from public statements, it became clear Albertsons felt deeply aggrieved: not only had the merger collapsed, but the company also believed Kroger had willfully breached several clauses in their agreement.
UFCW’s Call for Leadership Changes
Some United Food and Commercial Workers (UFCW) local unions urged Kroger’s board to replace CEO Rodney McMullen following the company’s announcement of a $7.5 billion stock buyback plan after the deal’s termination. The UFCW local unions that had led the “Stop the Merger Coalition” argued that the “abrupt” and “massive” share repurchase program came at a time when Kroger needed investments in staffing, repairs, and store remodels. Kroger’s new repurchase program includes plans for an accelerated share buyback program of about $5 billion of common stock.
Albertsons Eyes Digital Growth and Cost Savings
In the wake of the terminated merger, Albertsons raised its profit forecast and emphasized investments to withstand competition from larger retailers. The company is focusing on expanding its digital sales and retail media business to draw in more shoppers. CEO Vivek Sankaran acknowledged that competition from mass retailers and club stores continues to grow, requiring Albertsons to adapt to maintain market share.
Albertsons is leveraging its retail media business to run targeted campaigns and increase customer spend. It also announced plans to deliver $1.5 billion in savings over the next three years. For fiscal 2024, Albertsons now expects identical sales growth between 1.8% and 2.0%, with adjusted profit per share projected between $2.25 and $2.31, slightly raised from earlier forecasts.
Reflections on a High-Profile Failure
In hindsight, the Kroger-Albertsons merger faced formidable odds from the start. On one side, you had a compelling business rationale—merging resources, scaling up to compete with larger rivals, and claiming that these moves would bring down consumer prices. On the other side, regulators, states, and unions questioned whether the combination would instead shrink choice, raise prices, and weaken the job security of thousands of workers.
The early opposition from the Senate antitrust panel, Senator Elizabeth Warren, and unionized workers was a bellwether. As the lawsuits multiplied and attorneys general from nearly a dozen states dug in their heels, it became increasingly clear that approval would be an uphill battle. By the time the FTC formally sued to block the deal, the writing was on the wall. Still, Kroger tried multiple rounds of divestitures and filed motions challenging the constitutionality of the FTC’s process, but these efforts weren’t enough to persuade the courts.
In the end, the decisive rulings in Oregon and Washington State courts—both blocking the merger—provided a harsh reminder that large-scale industry consolidation faces no shortage of obstacles. Beyond the legal complexities, the groundswell of union and consumer activism raised the political temperature. For unions, the fear of layoffs, store closures, and stagnant wages overshadowed any potential benefits in combined purchasing or improved supply chain efficiency. For consumers, rising grocery bills and fewer choices in local markets were legitimate concerns. For regulators and lawmakers, the deal’s size and potential impact on market concentration were just too big to ignore.
Conclusion: A Stark Warning for Future Mega-Mergers
The failed Kroger-Albertsons merger serves as a cautionary tale for future corporate consolidations, especially in consumer-facing industries. The ordeal put a spotlight on the sheer breadth of forces that can derail a big-ticket merger: robust union activity, vocal lawmakers, and multi-state coalitions of attorneys general unafraid to flex antitrust laws. It also underscored the complexity of balancing corporate ambitions with real-world impacts on consumers, workers, and local communities.
For Albertsons, its future remains uncertain. CEO Vivek Sankaran had forewarned that, without a large-scale solution, the company might again seek a buyer within a couple of years. Whether this leads to a restructured deal with a different grocery chain, a private equity takeover, or a painful downsizing remains to be seen. Kroger, meanwhile, faces the immediate challenge of defending itself against Albertsons’ lawsuit in Delaware.
What’s clear is that the U.S. grocery landscape continues to shift rapidly. Stiff competition from Walmart, Costco, and online retailers like Amazon continues to transform consumer expectations around convenience, price, and in-store experience. In an environment where every penny counts, consolidation can offer a lifeline—or prove a liability—depending on how regulators and the courts weigh the benefits and risks.
When all was said and done, a multibillion-dollar deal that once appeared to have a clear path to finalization ended with two companies back at square one—one of them accusing the other of bad faith in court. It’s a painful reminder that not all strategic alliances in the grocery industry, or any industry for that matter, come to fruition. Instead, some deals become lessons in the complexities of corporate mergers, the power of unions, and the might of federal regulators wielding the country’s antitrust laws.
Key Learnings for Arbitrageurs
M&A among large retailers is fraught with headline risk because it attracts a large contingent of vocal critics ranging from politicians to unions. The acquisition of Rite Aid by Walgreens and that of Office Depot by Staples both failed.
Considering how long these deals take to wind their way through the antitrust process before failure, market or industry conditions can change and leave the target company in significantly worse shape than when the merger was first announced. Rite Aid struggled for years after that acquisition failed and eventually went bankrupt.
The history of consolidation in the specific industry or of the target company is important in assessing how remedies like divesting certain stores will work or not work for regulators.
When Walgreens was trying to acquire Rite Aid, the companies eventually agreed to divest 1,200 stores to Fred’s but that was not enough for regulators. When Albertsons acquired Safeway in 2015, they agreed to divest 168 stores including 146, which were acquired by Haggen Holdings. Regulators point to the fact that Haggen Holdings filed for bankruptcy less than a year later and sued Albertsons. Something similar had occurred when Hertz acquired Dollar Thrifty and the company that acquired 29 rental locations from Hertz ended up filing for bankruptcy less than a year later.
There are several grocery chains in the U.S. like Trade Joe’s, Grocery Outlet, Whole Foods, Sprout Farmers Market, etc. but arbitrageurs need to pay attention to not just national level competition but also competition within specific markets. Just like urban food deserts, a merger like this could leave certain communities with multiple banners like Safeway, Albertsons, Vons, Lucky, Ralphs and Fry’s that are all operated by the same company.
Just like we saw with the Spirit Airlines deal as discussed in this article professional arbitrageurs who run concentrated arbitrage funds correctly anticipated the risks inherent in this merger and either did not participate in this deal or had very little exposure through small positions.