Democratic attorneys general in California, Washington, Illinois and the District of Columbia are scrambling to halt a proposed $4 billion payout to investors in the grocery chain Albertsons in the midst of the company’s $25 billion merger with rival Kroger.
Karl Racine (D), the District of Columbia’s Attorney General, said Wednesday his office had filed a federal lawsuit aimed at stopping the special dividend from being paid this month “until a full review of their proposed merger is complete.”
California and Illinois are also parties to the lawsuit, which argues that the dividend would violate state and federal antitrust laws.
“This proposed merger is far from a done deal, making Albertsons’ decision to give away one-third of its market cap very concerning,” said California Attorney General Rob Bonta (D) in a statement.
Washington State Attorney General Bob Ferguson (D) filed a separate lawsuit on Tuesday in King County Superior Court in Seattle to halt the dividend payment.
“Paying out $4 billion before regulators can do their job and review the proposed merger will weaken Albertsons’ ability to continue business operations and compete,” Ferguson said in a statement.
A hearing on Ferguson’s request for a temporary restraining order is scheduled for Thursday afternoon. California, Illinois and the District of Columbia are also seeking a temporary restraining order.
The Democratic attorneys general are concerned that the dividend – which they say exceeds two years of Albertsons’ profits — could affect the company’s cash flow and harm consumers, possibly leading to higher prices and even store closures.
“Albertsons’ rush to secure a record-setting payday for its investors threatens District residents’ jobs and access to affordable food and groceries in neighborhoods where no alternatives exist,” Racine said in his statement.
Separately, Racine has also announced a formal investigation into the planned merger and its impact on consumers and workers.
Albertsons owns Safeway, Vons, Jewel-Osco, Haggen and other supermarket chains. Kroger owns chains including Fred Meyer, Harris Teeter and King Soopers. Combined, Albertsons and Kroger have nearly 5,000 stores in 48 states and the District of Columbia, along with more than 710,000 employees, the attorneys general said.
The two chains are the largest grocery stores in America, though they face stiff competition from the big box companies Walmart and Costco, along with Amazon’s increasing foray into the grocery world.
In a statement Wednesday, Albertsons said there is “no legal basis” for canceling the dividend, which the company said is not contingent on its merger with Kroger.
“The allegation that this dividend will somehow hinder our ability to compete in the marketplace is also meritless,” the statement said. “Given our financial strength and positive business outlook, we are confident that we will maintain our strong financial position as we work toward the closing of the merger.”
Previously, the same group of Democratic attorneys general, along with the Republican attorneys general in Idaho and Arizona, wrote a letter to Albertsons and Kroger demanding that Albertsons delay the $6.85 per share stockholder payout. Albertsons announced the special dividend on October 14.
Even before the dividend, the proposed merger of America’s two largest grocery chains, announced earlier this month, raised antitrust concerns. Sens. Amy Klobuchar (D-Minn.) and Mike Lee (R-Utah), the leaders of the Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights, said last month they would look into the proposed merger.
Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) and Rep. Jan Schakowsky (D-Ill.) called on the Federal Trade Commission to reject the merger.
In a statement Wednesday, Mark Federici, president of the United Food and Commercial Workers Local 400 in Washington, D.C., praised the state-led lawsuit and said payment of the dividend could “put the livelihoods of countless grocery store workers in jeopardy.”