(Bloomberg) -- Kroger Co. and Albertsons Cos. have spent more than $800 million on fees to lawyers, bankers and advisers for their proposed merger, underscoring the high costs of trying to complete the largest ever tie-up between two US grocery chains.
The merger is facing five legal challenges, including a federal court challenge in Oregon, two state lawsuits in Colorado and Washington and an administrative trial in the Federal Trade Commission’s in-house court. A group of consumers also unsuccessfully sued over the deal last year. A preliminary injunction hearing is set to start at the end of August.
Kroger and Albertsons have said the tie-up would help them more effectively compete against bigger rivals like Amazon.com Inc. and Walmart Inc. If the deal goes through, banners from Safeway and Vons to Ralphs and Dillons would unite under one umbrella across 48 states and Washington, DC.
Kroger has spent about $535 million on merger-related fees since agreeing to acquire Albertsons in late 2022, according to filings with the Securities and Exchange Commission. Albertsons has spent $329.4 million so far, bringing the total fees to about $864 million.
Merger-related costs often include fees for lawyers, bankers and consultants, and some companies pay bonuses for employee retention. That amount doesn’t include hundreds of millions of dollars in potential breakup fees the grocers would pay if the $24.6 billion deal doesn’t come to fruition.
A Kroger spokeswoman said the company is investing in employee wages, staff benefits and prices for consumers, including $2.4 billion on wages since 2018. The company will also spend $1 billion in wages and benefits and $500 million to cut prices following the merger close.
An Albertsons spokesman said the merger will lower prices, protect union jobs and improve the shopping experience for customers. He added that only Amazon, Walmart and other big, non-union retailers would benefit if the deal is blocked.
Kroger has hired lawyers from three firms to assist in the litigation brought by the FTC and state attorneys general: Arnold & Porter Kaye Scholer, Weil Gotshal & Manges and Stoel Rives. Citigroup Inc. and Wells Fargo & Co. are offering financial advice to Kroger.
Albertsons likewise has three law firms representing it in court: Williams & Connolly, Debevoise & Plimpton and Dechert. Jenner & Block is offering corporate legal counsel to Albertsons, while Goldman Sachs Group Inc. and a unit of UBS Group AG are providing financial advice.
The companies also have hired experts on economics, labor, accounting and the retail grocery industry to testify in the litigation, outside public relations consultants to assist with media inquiries and e-discovery vendors to help collect and store the millions of documents, emails and text messages requested by enforcers during the investigation. There are also advisers involved with the proposed divestiture of 579 stores to C&S Wholesale Grocers, a remedy that the grocers hope will appease regulators.
Public companies don’t always break out the costs associated with mergers. Microsoft Corp., for example, said it expects to pay $1.8 billion in “integration and transaction-related costs” for its $69 billion merger with game developer Activision Blizzard Inc. That deal required antitrust approvals in 16 jurisdictions around the world and involved legal challenges in both the US and UK.
In JetBlue Airways Corp.’s failed bid to buy Spirit Airlines Inc. for $3.8 billion, the companies paid $844.3 million related to the merger and resulting antitrust litigation, according to their securities filings. JetBlue paid $652 million, which included a breakup fee when the merger was terminated, prepayments to Spirit shareholders and reimbursements to Spirit when it broke off a proposed deal with rival Frontier Group Holdings Inc. Spirit, meanwhile, paid $192.3 million related to the deals, including $66.8 million in special employee retention payments.
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