AGs Sue to Halt Dividend Amidst Kroger Merger

On Wednesday the District of Columbia, California and Illinois filed a complaint and temporary restraining order in federal court in the nation’s capital in an effort to block Albertsons Companies, Inc. from issuing a $4 billion special dividend before antitrust regulators review its proposed sale to Kroger. 

The lawsuit was filed after attorneys general from D.C. Arizona, California, Idaho, Illinois and Washington requested, in a letter sent on October 27, that Albertsons hold off paying the special dividend. The dividend is worth more than two years of Albertsons’ profits and is 57 times greater than the company’s historic dividends at $6.85 per share. 

In a press release filed by Attorney General Karl Racine of D.C. last week, he alluded to the present litigation stating his office is “actively exploring other options to achieve our objectives, including litigation.” Further, Racine also announced a formal investigation of the proposed acquisition of Albertsons by Kroger through the press release.

The present lawsuit alleges that the special dividend by Albertsons would violate federal and state antitrust law because it would severely hinder Albertsons’ ability to operate, making it unable to compete with other supermarkets including Kroger. The lawsuit asks the court to block the special dividend until a full review of the proposed merger agreement with Kroger can be completed. 

The proposed merger was first announced through a joint press release by the two companies and the deal is valued at $24.6 billion. The merger of the two rivals would combine the two largest operators of stores dedicated to groceries with their combined sales representing 16% of the market. The merger has raised  regulatory scrutiny since it was announced despite the companies’ plan to spin off up to 650 of their stores to ease antitrust concerns.

In a press release filed by the D.C. Office of the Attorney General in conjunction with the lawsuit, Racine states that the special dividend “threatens District residents’ jobs and access to affordable food and groceries in neighborhoods where no alternatives exist” Further, he argues that it would have a devastating effect on struggling people and families with limited access to grocery stores during historically high inflation.