Kroger and Albertsons have racked up more than $800 million in expenses related to their proposed merger, highlighting the huge financial burden of attempting the largest merger ever between two U.S. grocery chains.
The merger itself, valued at $24.6 billion, has been hit with significant hurdles, including five separate legal challenges, according to The Dallas Morning News.
These include a federal lawsuit in Oregon, state lawsuits in Colorado and Washington, and a hearing in the Federal Trade Commission’s court. A group of consumers also brought an unsuccessful lawsuit against the deal last year.
A preliminary injunction hearing is now scheduled for late August.
Despite these challenges, Kroger and Albertsons have argued that the merger is essential for competing against major rivals such as Amazon and Walmart, as previously reported by The Dallas Express.
If approved, the merger would combine brands such as Safeway, Vons, Ralphs, and Dillons under a single entity spanning 48 states.
Kroger’s financial filings reveal that the company has spent close to $535 million on merger-related fees since the agreement was reached in late 2022. Albertsons has spent around $329.4 million, bringing the total expenses thus far to around $864 million.
This figure covers various costs, including legal and financial advisory fees, as well as potential bonuses for employee retention. Not included in this sum are potential “breakup” fees that the companies might face if the merger falls through.
Kroger has emphasized its commitment to employees and consumers, noting investments of $2.4 billion in wages since 2018 and plans to allocate $1 billion in wages and benefits and $500 million to reduce prices once the merger is finalized, reported The Dallas Morning News.
Albertsons has similarly asserted that the merger will lead to lower prices, protect union jobs, and enhance the customer shopping experience. A spokesperson for the company suggested that blocking the deal would primarily benefit large, non-unionized retailers like Amazon and Walmart.
Kroger has used three law firms so far: Arnold & Porter Kaye Scholer, Weil Gotshal & Manges, and Stoel Rives, alongside financial advisors Citigroup Inc. and Wells Fargo & Co.
Albertsons has enlisted the help of Williams & Connolly, Debevoise & Plimpton, and Dechert, with Goldman Sachs Group Inc. and UBS Group AG providing financial counsel, per The Dallas Morning News.
An advisory team is also assisting with the proposed sale of 579 stores to C&S Wholesale Grocers.
For context, other big business mergers have similarly incurred huge costs.
Microsoft’s $69 billion acquisition of Activision Blizzard Inc. is expected to cost $1.8 billion in integration and transaction-related expenses alone, while JetBlue Airways’ failed attempt to acquire Spirit Airlines Inc. saw $844.3 million in merger-related costs and litigation fees.
The proposed merger between Kroger and Albertsons was previously placed on pause due to a lawsuit filed in Washington State challenging the agreement, as previously reported by The Dallas Express.
The two grocery chains settled on merger terms in 2022, but they have faced pushback from activists and labor unions who argue that the deal would lead to higher prices and fewer consumer choices.
“Shoppers will have fewer choices and less competition, and, without a competitive marketplace, they will pay higher prices at the grocery store,” Washington Attorney General Bob Ferguson said in January.