Attorneys general from California, Illinois, Washington, D.C., and Washington state have filed lawsuits asking courts to temporarily block grocer Albertsons’ planned $4 billion payout to shareholders amid antitrust concerns over a merger with Kroger.
The business combination could have a major effect on real estate, spanning thousands of properties across the country.
Albertsons is scheduled to pay the special dividend Monday, but the attorneys general have voiced concerns that the payment is premature and could significantly hamper Albertsons' ability to compete ahead of the merger. Kroger, the nation’s largest supermarket chain, announced in October its plans to acquire Albertsons for about $25 billion. The deal isn’t expected to close until 2024.
Last week, a team of attorneys general from six states authored a letter asking Albertsons to hold off on the payment until the Federal Trade Commission had a chance to complete its review of the proposed merger. Albertsons responded saying it would continue with the payout, claiming the dividend was planned before the merger. This stood in contrast with Kroger’s original announcement about the merger, where it said, “As part of the transaction, Albertsons Cos. will pay a special cash dividend of up to $4 billion to its shareholders.”
On Tuesday, Washington state Attorney General Bob Ferguson filed the first lawsuit asking courts to block the payout, followed by attorneys general from California, Illinois and D.C., who all filed Wednesday. Attorneys general from Arizona and Idaho were part of the team that wrote the letter to Albertsons last week, but neither has filed a lawsuit at present.
The lawsuits claim that the payout violates Section 1 of the Sherman Act, a federal law that forbids parties from entering into agreements that could substantially lessen competition or restrain trade. Specifically, the officials said they were concerned Albertsons could not advertise and price competitively due to restricted cash flow after the payout.
Decreased competition has the potential to drive up prices, an increasing worry as consumer grocery prices have risen almost 12% in the past year, according to Forbes.
Competition Concern
“As inflation drives up grocery prices, a decrease in competition has the potential to be devastating for hardworking California families and for those who work at these stores,” California Attorney General Rob Bonta said Wednesday in a statement. “This proposed merger is far from a done deal, making Albertsons’ decision to give away one-third of its market cap very concerning.”
D.C. Attorney General Karl Racine joined in this sentiment in a separate announcement, using the example of Safeway and Harris Teeter, two of the District's major grocery competitors that are owned by Albertsons and Kroger, respectively.
Similarly, in the Chicago area, major chains Jewel-Osco, owned by Albertsons, and Mariano’s, owned by Kroger, are in direct competition, Illinois Attorney General Kwame Raoul said in his statement.
Albertsons’ $4 billion payout would be about 57 times greater than the dividends it has historically provided to shareholders.
Kroger, based in Cincinnati, and Albertsons, headquartered in Boise, Idaho, would have an enormous combined real estate portfolio if the merger is finalized.
It would include 4,996 stores, 3,972 pharmacies, 2,015 fuel centers, 66 distribution centers and 52 manufacturing plants. Kroger would own an estimated 11.8% of the food and grocery market, still about 5 percentage points behind market leader Walmart, research firm GlobalData has said.