The merger failed. The dispute over who should absorb the loss is now reaching trial.
Albertsons seeks more than US$8 billion from Kroger over their collapsed combination. The Delaware bench trial was scheduled to begin October 19.
Albertsons alleges that Kroger breached its commitments to obtain antitrust approval. Kroger disputes that interpretation and maintains that it fulfilled its obligations. No liability finding has been made. Reuters: Albertsons begins its trial against Kroger.
Who bears regulatory risk?
The dispute puts a central merger-agreement question under pressure: how much must a buyer sacrifice to secure regulatory clearance?
That question can remain abstract while a transaction is progressing. It becomes concrete when regulators seek divestitures or other concessions that would make the combined business less attractive.
For deal counsel, the case illustrates why regulatory-risk provisions deserve the same attention as price.
An agreement needs to address more than a general commitment to cooperate. The parties should understand who controls the clearance strategy, what concessions may be required, whether obligations have express limits and how disagreements will be resolved while the transaction remains alive.
An efforts obligation, a defined divestiture commitment and an unconditional obligation to achieve approval can allocate very different risks. Drafting should make those differences visible before commercial pressure tests them.
Preserve the decision record
The litigation also highlights the importance of keeping a clear decision record. If a transaction fails, the parties may later need to explain why a proposed remedy was rejected, why an alternative was pursued and whether a decision reflected regulatory constraints or commercial preference.
That makes contemporaneous documentation consequential. It can help distinguish an unsuccessful approval strategy from an alleged refusal to perform a contractual obligation.
Test drafting against difficult outcomes
Canadian M&A counsel should follow the dispute for its treatment of contractual risk allocation, while assessing Canadian transactions under their governing agreements and applicable law. The useful drafting exercise is to test a provision against an uncomfortable scenario: what happens if clearance requires concessions the buyer no longer wants to make?
A failed approval is a regulatory outcome. Whether either party must pay for it is a separate contractual question.
The most important merger negotiations may concern what happens when the deal cannot close.
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Sources: Reuters: Albertsons begins its trial against Kroger .