Kroger Made a “Hell or High Water” Promise. Now Delaware Will Price the Broken Merger.

(SeaPRwire) –  

Every dealmaker in America should care about this grocery fight. It is not about shelf prices. It is about the meaning of a promise. Most merger agreements use the phrase “reasonable best efforts.” That is lawyer-speak for “we’ll try.” Kroger did not settle for that when it agreed to buy Albertsons for $24.6 billion in 2022. It promised to take “any and all actions” necessary to win approval. Albertsons took that promise seriously. In the trade, that language is called hell or high water. It means the buyer commits to getting the deal done, not merely attempting to get it done. Then the water rose. In December 2024, a federal judge in Oregon blocked the merger. A state judge in Seattle did the same in a suit brought by Washington’s attorney general. Albertsons terminated the deal and sued Kroger the next day. This week, the Delaware Court of Chancery began hearing the case. The trial runs two weeks. The court must decide whether Kroger broke its word.

Here is what the record shows. Kroger’s defense will be that it really tried. It spent heavily on approval efforts. It had top advisors. It had every economic incentive to close. The problem, from Albertsons’ side, is that trying hard was not the contract. The contract required results, or at least every conceivable action short of a result. Kroger will blame skeptical Biden administration regulators. Albertsons will point to the divestiture plan. The spin-off had to create a viable competitor. That means selling the right stores, the right private labels, the right manufacturing sites, and the right assets. Albertsons says Kroger instead decided what it would never sell. The merged company would keep the crown jewels. A new firm would get leftovers. Regulators and judges saw the same weakness. Former Kroger CEO Rodney McMullen conceded under oath that Kroger agreed to do whatever the contract required. That testimony is hard to walk back. Then there are the pay packages. Senior executives allegedly stood to earn bonuses up to six times their base salaries if the merger closed with targeted financial returns. That gave them a direct financial incentive to resist selling valuable assets, even if it doomed the deal. Kroger’s lawyers will dismiss that as compensation structure. Albertsons will frame it as motive. The departures make the story messier. McMullen left amid unspecified personal behavior issues. CFO Gary Millerchip left for a job at Costco. Both exits happened at crucial moments. Neither side seems eager to explain them in court.

This is, at bottom, a contract case. The Delaware court is not being asked to grade Kroger’s corporate culture or McMullen’s character. It is being asked whether a promise to take any and all actions was actually kept. If Albertsons wins, the damage award could be more than $8 billion. That would be a strange outcome. Albertsons will argue that Kroger put financial return ahead of its contractual obligations. Yet the bill would hit Kroger’s financial return directly. The larger message to the market is plain. Sellers will read this ruling and decide whether hell or high water language is worth anything. Buyers will price that risk into future bids. Some deals may get harder to sign. Others will carry steeper termination penalties. The era of vague merger promises may be ending. Watch the Delaware trial closely. It will tell you exactly what a broken merger promise costs.