Washington State Court Blocks Albertsons Payout Following Merger with Kroger

On Thursday, the Superior Court of Washington for Kings County issued an order granting the plaintiff State of Washington’s motion for a temporary restraining order (TRO) against defendant Albertsons Companies, Inc. (Albertsons) The TRO enjoins Albertsons, through November 10, from paying a “Pre-Closing” or “Special” dividend to its shareholders “in an amount up to $4 billion.”

The dividend payment had been scheduled for November 7 and, according to the Order, is part of the Agreement and Plan of Merger Albertsons and Kroger entered into on October 13. The proposed merger and extraordinary dividend has garnered much press interest and scrutiny by state attorneys general.

The State of Washington is the sole plaintiff. The defendants are Albertsons; Albertsons Companies Specialty Care, LLC; Albertson’s LLC; Albertson’s Stores Sub LLC; The Kroger Co.; and Kettle Merger Sub.

The state argues in its motion that the “Special Dividend” payment requires Albertsons to use 75% of its liquid assets ($2.5 billion of cash-on-hand) and to borrow $1.5 billion at a time when “its credit and liquidity ratings are already low.” The dividend payment will, in the State’s view, make it more difficult for Albertsons to compete with Kroger “during the pending enforcer review [of the proposed merger],” which currently is anticipated to close in early 2024. The state contends that the Special Dividend violates its unfair competition and restraint of trade statutes.