On Friday, a Washington state court issued an order denying the state’s preliminary injunction and extending its temporary restraining order (TRO) against supermarket chain Albertsons’ $4 billion special dividend related to its proposed merger with competitor Kroger.
The order states that the merger agreement between Kroger and Albertsons allows Albertsons to pay shareholders a “Pre-Closing Dividend” in an amount up to $4 billion, which is about $6.85 per share. Both the $24.6 billion merger and special dividend faced scrutiny by states and regulators resulting in attorney generals from D.C., Arizona, California, Idaho, Illinois and Washington sending a letter to Albertsons requesting that it halt the dividend payout.
Following the letter, the Superior Court of Washington for Kings County issued an order and TRO preventing Albertsons from paying the special dividend through November 10, which was previously covered by Law Street Media. The state purports that the $4 billion payment would require Albertsons to use 75% of its liquid assets and to borrow $1.5 billion at a time when “its credit and liquidity ratings are already low.” The state therefore argued the dividend will make it nearly impossible for Albertsons to compete with Kroger while regulators review the proposed merger in violation of Washington unfair competition and restraint of trade statutes.
On November 3, the Court Commissioner extended the TRO until the court’s hearing on December 9, 2022, for Washington state’s preliminary injunction against the dividend. Through the order, the court stated that Washington failed, during the hearing, to establish a likelihood that it will be able to prove that Albertsons’ payment of the special dividend is an unfair method of competition at trial. Therefore, the court denied the state’s preliminary injunction to halt the special dividend.
However, the court extended the temporary restraining order until December 19, 2022 to allow the state to appeal the court’s ruling. The court noted that denying the preliminary injunction without extending the TRO would allow Albertsons to immediately issue the special dividend without recourse from the state.