Attorneys general say Albertsons should delay $4B dividend

A bipartisan group of attorneys general is asking Albertsons to delay a $4 billion payout to its shareholders until they complete a review of Kroger’s proposed acquisition of the grocery chain.

Kroger earlier this month announced it would pay $20 billion to buy Albertsons. The deal is expected to close in early 2024, if approved by the Federal Trade Commission and the Department of Justice and weathering any court challenges.

The merger agreement included a special dividend of up to $4 billion __ or $6.85 per share __ that Albertsons expects to pay its shareholders on November 7th.

In an open letter sent to Albertsons this week, six attorneys general said the dividend __, which represents nearly a third of Albertsons’ $11 billion market value, __ would deprive the company of the cash it needs to operate, while regulators review the merger.

The letter also said it was unclear whether the deal would be approved because federal and state laws prohibit mergers, which significantly reduce competition. Together, Cincinnati-based Albertsons and Kroger would control about 13% of the US grocery market.

“Should a regulatory challenge to the merger be successful, or should the parties abandon the transaction, Albertsons would have to continue to compete with other grocery stores, a goal that its decision to enrich its $4 billion shareholders will have significantly more accomplished.” hard to do,” the letter said.

The letter was signed by the Democratic Attorneys General of the District of Columbia, California, Illinois and Washington, and the Republican Attorneys General of Arizona and Idaho. Albertsons is based in Boise, Idaho.

In a statement, Albertsons said the merger announcement and special dividend mark the successful completion of a strategic review of the company’s future that began in February. The company had nearly $29 billion in assets at the end of September, including $3.4 billion in cash and cash equivalents.

“We are confident that we will maintain our strong financial position as we work toward completion of the merger,” said Albertsons.

The attorney general asked Albertsons to respond to his letter by Friday. A spokesman for District of Columbia Attorney General Karl Racine declined to say Thursday whether Albertsons would have responded because the office does not comment on the investigation.

However, Racine said that attorneys general will consider litigation to halt dividend payments if Albertsons doesn’t agree to a delay. Attorneys general can also sue alone or with the Justice Department to block a merger, as they did in 2019 when T-Mobile bought its smaller competitor Sprint.

Among those who could benefit most from Albertsons’ dividend payment is Cerberus Capital Management, a private equity firm. Cerberus led a consortium of investors that bought Albertsons in 2006. It helped fund Albertsons’ purchase of the Safeway chain in 2015 and took Albertsons public in 2020. Cerberus owns nearly 30% of Albertsons stock.

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