The U.S. District Court for the District of Columbia has denied a request by the attorneys general of California, Illinois and D.C. for a temporary restraining order (TRO) to delay a planned $4 billion special dividend payment by Albertsons Cos. related to its merger deal with The Kroger Co.
Boise, Idaho-based Albertsons reported the court’s decision late yesterday. The dividend of $6.85 per common share was slated to be paid Nov. 7 but remains suspended under a TRO attained Nov. 3 in Washington state through the King County Superior Court.
The TRO blocks the payment of the special dividend until at least Nov. 10, when the court will decide to extend or dismiss it. D.C. AG Karl Racine said in a Nov. 4 joint status report filing that he aims to move for a preliminary injunction after the court rules on the Washington state TRO.
“Albertsons Cos. continues to seek to overturn the existing temporary restraining order granted by the Washington state court on Nov. 3, which was based on the incorrect assertion that payment of the special dividend would impair the company’s ability to compete while its proposed merger with The Kroger Co. is under antitrust review,” Albertsons said in its Nov. 8 statement.
Kroger and Albertsons unveiled their $24.5 billion merger deal on Oct. 14, in which the nation’s largest supermarket retailer (Kroger) plans to acquire the second-largest (Albertsons). They expect the transaction to close in early 2024, but industry observers said the regulatory approval process could take up to two years.
The AGs of D.C., California and Illinois last week had filed suit to halt the Albertsons dividend payment pending a full review of the merger agreement by state and federal regulators. The lawsuits came after a letter sent late last month to Albertsons CEO Vivek Sankaran and Kroger CEO Rodney McMullen urging them to stop the dividend payment. The letter — signed by Ferguson, Racine and state AGs Mark Brnovich (R.) of Arizona, Rob Bonta of California (D.), Lawrence Wasden (R.) of Idaho and Kwame Raoul (D.) of Illinois — asked Albertsons to respond by Oct. 28. Idaho AG Lawrence Wasden (R.) also reportedly called on Albertsons to delay the dividend. However, the grocer declined to suspend the dividend payment.
Efforts to stop the special dividend claim that the its size will hamper Albertsons’ operations and ability to compete during the merger deal’s antitrust review, in turn impacting workers and shoppers.
“Albertsons Cos. continues to maintain that the lawsuit 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. After payment of the special dividend, Albertsons Cos. will have approximately $3 billion of liquidity, including approximately $500 million in cash and approximately $2.5 billion available under its already existing asset-based lending facility, and expects to continue to generate strong revenues and positive free cash flow, further increasing liquidity. Albertsons Cos. is confident that it will continue to make strategic progress following the payment of the special dividend, given its strong cash flows and low debt profile,” Albertsons stated Tuesday, adding, “The company remains fully committed to investing in the associates, stores, and digital capabilities that have made its recent growth and strong performance possible.”
