Albertsons sued by State AGs over dividend ahead of merger review

(Bloomberg) — A group of state attorneys general have joined forces to stop Albertsons Cos. to pay $4 billion to shareholders in the form of a special dividend ahead of state and federal antitrust reviews of the grocery chain’s potential merger with rival Kroger Co.

A lawsuit filed Wednesday in federal court in the nation’s capital by officials from the District of Columbia, California and Illinois follows earlier action by Washington state accusing Albertsons and Kroger of violating antitrust laws. and consumer protection.

As their Washington state counterpart, District of Columbia Attorney General Karl Racine and California Attorney General Rob Bonta said they were seeking a temporary restraining order to stop Albertsons from distributing the dividend. while the legal battle continues.

Read more: Albertsons urged by AGs to suspend $4bn payment under deal

“Albertsons’ rush to secure record pay for its investors threatens the jobs of district residents and access to affordable food and groceries in neighborhoods where no alternative exists,” Racine said. in a statement, which noted that the complaint had been filed under seal by public view.

Albertsons had announced the dividend after agreeing to merge with Kroger in a deal valued at $24.6 billion. In an Oct. 28 letter reviewed by Bloomberg, the supermarket chain told multiple attorneys general that the payment was independent of the merger and part of a plan to return capital to shareholders. The deal is expected to close in early 2024.

“The lawsuit filed by the Washington State Attorney General is without merit and provides no legal basis to rescind or postpone a dividend that has been duly and unanimously approved by Albertsons Cos.” board fully informed,” an Albertsons spokesperson said in a statement.

“The decision to issue a special dividend was made solely by Albertsons” and is “independent of the merger transaction,” a Kroger spokesperson said in a statement, adding that Kroger remains committed to working with Federal Trade. Commission, state attorneys general and others. “to complete the transaction and unlock the many benefits it offers.”

Making payments to the tune of $4 billion, through cash and loans, “will cripple Albertsons’ ability to operate its stores and compete meaningfully with Kroger in the run-up to the deal and the will leave in a weakened state if the deal subsequently falls apart,” Washington State said in its lawsuit, which was filed in Seattle state court.

The $4 billion “special cash dividend” represents “a windfall” for a consortium of private equity firms that back Albertsons, the state said.

“Dwindling cash therefore has the potential to do things like reduce Albertsons’ ability to purchase inventory, such as infant formula, and stock its retail store shelves for consumers who need it to maintain infants’ lives,” the state said. It could also lead to layoffs, the state said.

“The allegation that this dividend will somehow impair our ability to compete in the marketplace is also without merit,” the Albertsons spokesperson said.

Last week, Racine, Bonta, Washington State Attorney General Bob Ferguson and their counterparts in Arizona, Idaho and Illinois urged Albertsons in a letter to suspend the dividend while they were reviewing the pending merger, saying it could be a “massive inappropriate giveaway to certain shareholders.

Bonta said in a statement Wednesday, “This proposed merger is far from complete, which makes Albertsons’ decision to divest one-third of its market capitalization very concerning.”

The grocery chain denied the attorneys general’s request in the Oct. 28 letter.

Canceling the dividend “would expose Albertsons to significant legal and financial liability” because ex-dividend stock trading is ongoing and “investors of all kinds are acting in reliance” on the plans, the company wrote. “As a result, Albertsons cannot comply with the States’ request to delay payment of the special dividend.”

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