Judge Pauses Albertsons’ $4 Billion Special Dividend Payout
A Washington judge has blocked Albertsons Cos. ACI +1.63% from paying out $4 billion in dividends while regulators review its proposed merger with Kroger. KR –1.74%
King County Superior Court Commissioner Henry Judson approved a motion on Thursday issuing a nationwide temporary restraining order on Albertsons ‘ special dividend payment. The $4 billion payout is a term of Albertsons’ (ticker: ACI ) intended $24.6 billion merger with Kroger ( KR ), and was scheduled for Nov. 7.
The motion was part of a lawsuit filed by Washington Attorney General Bob Ferguson. The suit argues that the dividend “risks severely undercutting the grocery giant’s ability to compete” while government regulators scrutinize the merger. In short, the company will have fewer resources to invest in stores, restock shelves, adjust to supply shortages, and “otherwise compete aggressively for customers,” the lawsuit argues.
“If the dividend goes forward, it will leave Albertsons in a weakened competitive position relative to other supermarkets,” the suit adds. “It will prevent the State from assessing (and addressing) the true market positions of the merging parties. And it will leave consumers to shop at two of Washington’s largest supermarket chains that no longer compete for their business in any meaningful way.”
The restraining order blocks Albertsons from paying the dividend until Nov. 10. Ferguson said he would be seeking an injunction to extend the pause while the suit winds its way through the courts.
A similar lawsuit was filed by Attorneys General from California, Illinois, and the District of Columbia.
In a statement on Thursday, Albertsons said it intended to seek to overturn the restraint “as quickly as possible,” adding that the temporary order was based on the “incorrect assertion” that paying the dividend would hurt the company’s ability to compete.
“Albertsons Cos. is well-capitalized, with limited debt and significant free cash flow and is in a strong position financially,” the company said in a statement. “The size of the dividend reflects the Company’s strength, rather than the illogical and damaging accusation that it is an attempt to weaken the Company.”
Albertsons estimates it will have approximately $3 billion of liquidity following the payout of the dividend, including approximately $500 million in cash.
Shares of Albertsons rose 2.6% to $21.46 in premarket trading. Kroger inched up 0.6% to $47.50.