Gail Weinstein is a Senior Counsel, Philip Richter is a Partner, and Steven Epstein is Managing Partner at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Richter, Mr. Epstein, Bernard A. Nigro Jr., Aleksandr B. Livshits, and Nathaniel L. Asker.
On December 10, 2024, two courts, on antitrust grounds, enjoined the planned $24.6 billion merger pursuant to which Kroger was to acquire Albertsons. After the injunctions were issued, Albertsons terminated the parties’ Merger Agreement and filed suit against Kroger in the Delaware Court of Chancery. Albertsons alleges that, post-signing, Kroger had a case of buyer’s remorse; and then, to derail the deal, willfully breached its obligations under the Merger Agreement to seek to obtain the antitrust approvals needed to close the deal. Albertsons is seeking the $600 million reverse termination fee (RTF) delineated in the Merger Agreement, as well as all legally available damages (including the lost merger premium). Kroger, in turn, has asserted that Albertsons breached the Merger Agreement and is not entitled to the RTF.
These developments are reminiscent of other busted deal situations, such as the 2017 $54 billion planned merger between Anthem and Cigna, which was enjoined on antitrust grounds. In that case, after trial, the Court of Chancery found that Cigna (the target company) had a post-signing change of heart about the deal and then actively worked against Anthem’s regulatory strategy in breach of the merger agreement—but that Cigna owed no damages to Anthem because the merger likely would have been enjoined in any event. In that case, the court determined that, in light of Cigna’s breach, it was not entitled to receive the RTF provided for in that transaction.
While some or all of the allegations in the Kroger/Albertsons dispute may or may not be found to be true, they prompt consideration as to how a target company can best protect itself against the possibility that a buyer may not timely and effectively comply with its obligations to pursue the necessary regulatory approvals for a deal.
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