WA attorney general files lawsuit against Kroger, Albertsons to delay $4 billion payment
Washington Attorney General Bob Ferguson filed a lawsuit Tuesday blocking Albertsons Companies Inc. from issuing a $4 billion payout to its shareholders until state and federal antitrust enforcers have reviewed the company’s proposed merger with Kroger.
Kroger announced on Oct. 14 that the two companies had agreed to merge in a $24.6 billion deal, with Kroger buying all of Albertsons’ outstanding stock. The merger agreement included a special dividend of up to $4 billion — or $6.85 per share — that Albertsons would pay to its shareholders Nov. 7.
According to filings with the Securities and Exchange Commission, the $4 billion dividend exceeds Albertsons’ cash on hand. According to the Washington State Office of the Attorney General, Albertsons’ planned to make the payment with $2.5 billion in cash with the rest of the money borrowed from elsewhere.
Ferguson filed the lawsuit in King County Superior Court. He also filed a temporary restraining order that would block Albertsons from making the dividend payment while Ferguson’s lawsuit is ongoing. The Office of the Attorney General expects a hearing on the temporary restraining order sometime this week.
An Albertsons Companies spokesperson told McClatchy News that the lawsuit was “meritless” and has “no legal basis.”
“The special dividend announced on Oct. 14 is the means by which we are independently executing our longstanding capital return strategy and is scheduled to be paid to Albertsons Cos.’ stockholders on Nov. 7,” Albertsons Companies spokesperson said in an email. “It is not contingent on our merger with Kroger and is not in any way a condition to Albertsons Cos.’ or Kroger’s obligation to consummate the proposed merger – it will be paid regardless of whether the merger is completed.”
The lawsuit comes after a bipartisan group of six attorneys general from around the country sent a letter to Albertsons urging the company to delay paying the special dividend until after the merger had been thoroughly reviewed.
“Paying out $4 billion before regulators can do their job and review the proposed merger will weaken Albertsons’ ability to continue business operations and compete,” Ferguson stated in a news release.
Ferguson argues t a lack of cash on hand could result in Albertsons struggling to keep up with inventory orders, resulting in empty shelves and potentially impacting store employee hours.
“The allegation that this dividend will somehow hinder our ability to compete in the marketplace is also meritless,” the Albertsons Companies spokesperson said. “Given our financial strength and positive business outlook, we are confident that we will maintain our strong financial position as we work toward the closing of the merger.”
Albertsons declined to delay the special dividend payment, which resulted in Ferguson’s lawsuit that accuses Kroger and Albertsons of violating state antitrust laws and the Consumer Protection Act.
“Free enterprise is built on companies competing, and that competition benefits consumers,” Ferguson said. “Corporations proposing a merger cannot sabotage their ability to compete while that merger is under review.”
The two grocery store giants have deep roots in Washington state and account for the vast majority of grocery stores in the state.
Albertsons owns Safeway and Haggen, and the company owns 216 stores in the state, including Albertsons grocery stores. Kroger owns Fred Meyer and QFC stores and accounts for 114 stores statewide.
According to the Washington State Attorney General’s Office, it’s estimated that the two companies employ 800,000 employees in nearly 5,000 stores nationwide.
