The Albertsons of Idaho, the Kroger, were hit by a lawsuit from Washington

Washington’s attorney general Bob Ferguson sued Tuesday to block the Albertsons from paying $ 4 billion to their shareholders until state and federal antitrust authorities consider the proposed merger of the food chain with Kroger.

Kroger announced on October 14 that the two supermarket giants had agreed to the merger in a $ 24.6 billion deal in which Kroger bought all of Albertson’s remaining stock. The merger agreement included a special dividend of up to $ 4 billion – or $ 6.85 per share – that Boise-based Albertsons would pay to its shareholders on Monday, November 7.

But, according to the Washington State Attorney General’s Office, which reviewed documents filed with the Securities and Exchange Commission, a dividend of $ 4 billion exceeds the Albertsons’ cash. In those documents, according to Ferguson’s office, Albertsons said it planned to make payments using $ 2.5 billion in cash, with the rest being borrowed from other sources.

Ferguson sued King County District Court in Seattle. He also filed for a temporary ban to prevent Albertsons from paying a dividend while Ferguson’s trial was pending.

Albertsons told Idaho Statesman that the lawsuit was “unfounded” and “had no legal basis.”

“The special dividend announced on October 14th is the means by which we independently implement our long-standing capital return strategy and is to be paid to Albertsons Cos.” shareholders on November 7, ”Albertsons said in an email. “This is not contingent on our merger with Kroger and is in no way a condition for Albertsons Cos.” or Kroger’s commitment to complete the proposed call will be paid irrespective of whether or not the call is terminated. “

The suit comes after a two-party group of six lawyers general from across the country, including Idaho Attorney General Lawrence Wasden, sent a letter to the Albertsons urging the company to delay paying a special dividend pending careful consideration of the merger.

“Paying $ 4 billion before regulators can do their job and review the proposed merger will undermine Albertsons’ ability to continue doing business and compete,” Ferguson said in a press release.

Ferguson argued that making the payment now would undermine Albertson’s ability to compete while regulators analyze the merger. The lack of cash on hand could make Albertsons struggle to keep up with warehouse orders, resulting in empty shelves and potentially impacting store hours, he said.

“The allegation that this dividend will somehow hamper our ability to compete in the marketplace is also unfounded,” said Albertsons. “Given our financial strength and positive business outlook, we are confident that we will maintain our strong financial position as we work to close the merger.”

Albertsons refused to delay the payment of a special dividend, which prompted Ferguson’s lawsuit. Accuses Kroger and Albertson of violating Washington State’s antitrust law and Washington State’s Consumer Protection Act.

“Free enterprise relies on competing companies, and this competition benefits consumers,” said Ferguson. “Corporations proposing a merger must not sabotage their ability to compete while this merger is reviewed.”

Albertsons has been selling shares to the public since June 2020, but is controlled by Cerberus Capital Management, a New York-based private equity firm that leads a group of investment firms that first acquired part of the former Albertsons Inc. in 2006, Sam Cerberus still owns approximately 30% of the Albertson stock and would collect a large portion of the special dividend.

The two food giants merge in more than 30 locations in the Boise area. Albertsons has 39 stores across Idaho and has several Safeway stores across the state. Kroger owns 11 Fred Meyer stores in the Gem State.

Albertsons is Idaho’s largest company and an icon of Boise, with annual sales of $ 72 billion, 290,000 employees nationwide and more than 5,000 employees in Idaho, the Idaho Statesman previously reported. Headquartered in Cincinnati, Kroger employs 420,000 people nationwide, including more than 2,000 in Idaho.

Map of Kroger Albertson 10-14-22.jpg
Under Kroger’s purchasing plan, the combined company would have stores in 48 states, excluding only Minnesota and Iowa, although some stores would be spun off from Albertsons to offset antitrust concerns. Kroger

The Washington State Attorney General’s office is expecting a temporary restraining hearing this week.

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