Attorneys general from Washington state and the District of Columbia are seeking to temporarily block a $4 billion payout to Albertsons’ shareholders on November 7, filing lawsuits this week to put a hold on the cash dividend at least until the grocery giant’s proposed merger with Kroger can be reviewed by federal regulators.
Albertsons’ shareholder payout was announced on October 14 alongside Kroger’s planned $24.6 billion acquisition of the Idaho-based public company. A “special dividend” to shareholders of $6.85 per share is scheduled to happen Monday, but the move raised concern among a bipartisan group of attorneys general from the District of Columbia, Arizona, California, Idaho, Illinois and Washington who last week sent a letter to the two retailers urging Albertsons to delay the payout.
While the merger itself isn’t expected to close until 2024, pending regulatory approval, the short timing of the payout would leave Albertsons without the necessary cash on-hand to continue operating effectively, according to the group. However, Albertsons refused the request, stating in a response letter that a delay would create “significant” legal and financial liabilities.
Although Albertsons and Kroger both said the dividend was a part of the deal in their original October 14 announcements, Albertsons claimed in its October 28 letter that the payout was planned prior to negotiations with Kroger about a potential acquisition.
Now, two separate lawsuits are asking courts to put the payout on ice before Monday’s deadline. Washington Attorney General Bob Ferguson filed the first lawsuit yesterday, claiming that the payout would leave Albertsons unable to properly compete with Kroger should the deal fall apart.
“While the agreement refers to this dividend as a ‘pre-closing dividend,’ it is better described as a ‘regardless of closing’ dividend because it will be paid to Albertsons’ shareholders regardless of whether the proposed merger is ever completed,” Ferguson said in a statement.
District Attorney General Karl Racine has now filed a lawsuit of his own, raising similar concerns, calling the dividend a “giveaway to private equity” and alleging it violates both the Sherman Act and District of Columbia law.
“Albertsons’ rush to secure a record-setting payday for its investors threatens District residents’ jobs and access to affordable food and groceries in neighborhoods where no alternatives exist,” Racine said in a press release. “This would have a particularly devastating impact on struggling people and families with access to fewer grocery stores during a time of historically high inflation. My office will use all our authority to stop this cash grab and protect District workers, families, and consumers.”
In addition to political scrutiny, the grocery merger has drawn criticism from labor unions representing workers at both retailers’ stores. In a statement, Mark Federici, president of United Food & Commercial Workers Local 400 which represents Safeway workers in Washington, D.C., praised the move by Racine to block the payout.
“If allowed to occur, this payout will leave Albertsons largely depleted of liquid assets and put the livelihoods of countless grocery workers in jeopardy,” Federici said in the release. “Instead of using their increased profits on exorbitant executive compensation packages and enriching Wall Street investors, Albertsons should invest in the essential workers who make the grocery company successful in the first place – the same workers who risked their lives to keep food on America’s tables throughout the pandemic.”
Around 75% of Albertsons stock is owned by various private equity firms, including controlling stakeholder Cerberus which holds 28.37% of the company, following its $100 million investment in 2013. Cerberus holds two of the 11 seats on Albertsons’ board of directors, including a co-chair position.