A Washington state court ordered Albertsons to halt its $4 billion special dividend to investors, which was set to be paid on Monday.
The ruling, issued Thursday by King County Superior Court Commissioner Henry Judson, temporarily suspended the payout and set a Nov. 10 date for a more detailed hearing by a state judge.
The decision came after the state’s attorney general, Bob Ferguson, filed a lawsuit seeking to block the payout before regulators have a chance to evaluate the planned merger’s effect on the grocery market. Attorneys general from Washington, D.C., California and Illinois filed a separate lawsuit on Wednesday that also sought to halt the payment, arguing it would financially hobble the company and reduce competition in the grocery industry, harming consumers.
Albertsons has said it plans to pay for the dividend using approximately $2.5 billion in cash on hand and take out loans to cover the rest. Thursday’s ruling noted that the dividend payment amounts to 75% of Albertsons’ liquid assets.
“By eliminating cash-on-hand and nearly doubling its debt, Albertsons will be in a weakened competitive position relative to Kroger, thereby harming grocery consumers and workers throughout Washington,” the ruling stated.
In a statement issued Thursday, Albertsons called this an “incorrect assertion,” noting that it operates a “thriving business” that tallied more than $75 billion in revenue over the four financial quarters ending in early September. It also said its $4 billion dividend was planned before it began discussing a merger with Kroger.
“Albertsons Cos. is well-capitalized, with limited debt and significant free cash flow and is in a strong position financially,” the statement read. “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 said it plans to “argue vigorously based on the factual record that there is simply no basis to continue restraining the payment” of the special dividend.
Pushback against Albertsons’ special dividend has become the latest tumult resulting from the proposed $24.6 billion merger between the grocer and Kroger. That deal, announced last month, would combine the nation’s two largest supermarket chains, creating a company with nearly 5,000 stores.
Executives from Kroger and Albertsons have argued that the merger would boost efficiency and lower prices for shoppers, while independent retailers, labor unions and other groups have expressed caution. Legal experts say the tie-up, which the companies estimate will be completed in 2024, will face careful scrutiny from regulators.
