Washington state Attorney General Bob Ferguson is attempting to delay or stop a major milestone in the major merger of Kroger and Albertsons supermarkets.
- “Washington state’s attorney general yesterday filed a lawsuit seeking to block supermarket chain Albertsons from paying a $4 billion cash dividend to shareholders,” says Axios.
- Albertsons is required to pay out a dividend on November 7 to its shareholders on that day regardless if the deal closes in 2024, as planned.
- Ferguson says that the dividend will put the grocery at a competitive disadvantage and threaten the food supply for his state by draining the company’s liquid assets by 75%.
- “Paying out the $4 billion will cripple Albertsons’ ability to operate its stores and meaningfully compete with Kroger during the time before the deal closes and leaves it in a weakened state if the deal subsequently falls apart,” says Ferguson.
- The attorney general will file a temporary restraining order in an effort to stop Albertsons from making the payment while the lawsuit is ongoing, says Yahoo Finance.
Why it’s Important
As we previously reported, Kroger and Albertsons are attempting to merge and become one of the largest retail chains in the U.S. Both chains are respectively the fourth and fifth largest grocery chains in the country, and combined they would operate over a large market share with over 5,000 stores.
The merger has already raised major anti-trust concerns, with politicians like President Joe Biden, Senator Elizabeth Warren, and Senator Bernie Sanders criticizing it as “dangerous” and “aggressive profiteering.”
Defenders of the merger say that monopolistic fears are overstated and that it will give the retailer the opportunity to compete against larger online and hybrid retailers.
“If Kroger and Albertsons think scaling up can help them compete with online-centric retailers such as Amazon and wholesalers such as Costco—in addition to traditional grocers such as Aldi, Meijers, Publix, and others—regulators should allow them to give it a go,” says National Review Online.
“Albertsons reportedly has called the lawsuit ‘meritless,’ and recently told a group of state AGs that the dividend is ‘independent’ of the merger. But here’s the thing: Albertsons last month said the dividend was ‘in connection with’ the merger, in its press release announcing the deal. Kroger’s press release called the dividend ‘part of the transaction.’ Albertsons and [private equity shareholder] Cerberus are seeking to take some money off the table ahead of a very tricky regulatory negotiation, which is certain to require divestitures,” says Axios.