Albertsons

Washington court keeps Albertsons’ $4B payout on ice

The special dividend payout, which has been subject to legal wrangling while the grocer’s $24.6 billion merger plans with Kroger are reviewed, will be on hold at least until Nov. 17 when the next hearing will be held.
Albertsons' headquarters
Albertsons' $4 billion shareholder payout remains on hold. / Photo: Shutterstock

Albertsons’ $4 billion shareholder dividend payout, scheduled to have been disbursed Monday, remains on hold following the ruling of a King County Superior Court commissioner late Thursday.

Commissioner Henry Judson granted the temporary restraining order filed by the state of Washington, blocking the payout, at least until a new hearing is held next Wednesday and Thursday. 

The ruling comes less than a month after Kroger announced its plans to merge with Albertsons in a $24.6 billion deal that would create a grocery giant, a deal that is still subject to government review.

Attorneys general and others around the country have expressed concern that paying the special dividend would leave Albertsons in a weakened financial state, unable to compete with Kroger, making the merger especially risky.

Thursday’s ruling contradicts the judgment Tuesday in a U.S. federal court in Washington, D.C., in which a judge denied a restraining order filed by the attorneys general of California, Illinois and Washington, D.C. that sought to halt the payout.

On Thursday, Oregon’s Attorney General Ellen Rosenblum added her voice to the complaint filed by Washington state earlier this month with an amicus brief that noted that consumers in her state would be harmed if Albertsons proceeds with the $4 billion payout before the merger can be investigated.

“Albertsons operates over 121 stores in Oregon,” the brief said. “Kroger has 51 Fred Meyer and 4 QFC stores in Oregon. The companies compete against each other throughout Oregon. Of Fred Meyer’s stores, 41 stores operate in the same city as an Albertsons store. In some Oregon cities such as The Dalles, Sandy, Tillamook and Florence, Defendants appear to be the only major grocery retailers and head-to-head competitors. Common ownership would remove the head-to-head competition these defendants currently face.”

Albertsons, in a statement late Thursday, maintained its position on the lawsuits. 

"Albertsons Cos. continues to believe that the claim brought by the State of Washington is meritless and provides no legal basis for canceling or postponing a dividend that has been duly and unanimously approved by Albertsons Cos.’ fully informed Board of Directors," the company said. 

Read more: 7 things to know about the Kroger-Albertsons merger

A merger of Kroger and Albertsons would create a grocery giant with nearly 5,000 stores and more than 700,000 employees. Albertsons alone operates more than 2,200 stores in 34 states, under banners such as Albertsons, Safeway, Vons, Jewel-Osco, Acme, Tom Thumb and more.

Cincinnati-based Kroger is the country’s second-largest grocer, by market share, behind Walmart. And Boise-based Albertsons ranks fourth, behind Costco. Combined, the new company would come closer to competing with retail giant Walmart.

Anticipating antitrust review, the companies said they are prepared to establish a subsidiary called SpinCo that would operate as a standalone public company with between 100 and 375 stores that had been divested in areas of overlapping retail operations.

The United Food and Commercial Workers International Union (UFCW) has 35,000 members, of which about 20,000 work at either Albertsons or Kroger stores, Jonathan Williams, the union’s communications director, told WGB.

UFCW has deep concerns about what would happen to Albertsons if the $4 billion dividend is paid, Williams said.

“This payout is more than the last 10 years of profits at Albertsons combined,” Williams said. “It seems to be a deliberate ploy to game the system … If it has no liquidity, when we go to negotiate our next union contract in the spring … the company will have no cash on hand. How will they fund wage increases? How will they fix a whole in the roof if there’s no money on hand?”

A dire financial situation for Albertsons could lead to store closures and a lowering of union density that could exert “a downward pressure on wages and job standards,” he said.

A senate panel is scheduled to discuss the proposed merger later this month. Senators Amy Klobuchar (D-Minn.) and Mike Lee (R-Utah) previously said they have “serious concerns” about the ramifications of the transaction.

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