Judge tells Albertsons to keep dividend pending, Cerberus Capital awaits

The last resort appeal to block the dividend in Washington comes as other states pursue a parallel effort in federal court in Washington, DC.

Since early November, court orders have delayed Albertsons’ plan to reward shareholders, including Cerberus Capital Management, before the closing of the $24.6 billion combination with Kroger. The U.S. Federal Trade Commission this week asked Kroger for more information on the deal, signaling an extensive antitrust review for a deal not expected to close until 2024 — if completed.

The Seattle-area judge ruled in a hearing on Friday that there was no legal justification to block the payment, but Washington Attorney General Bob Ferguson immediately appealed to the highest court. of State.

Albertsons argued it should be allowed to go ahead with the special dividend because it had already planned to pay out at least $4 billion in cash to shareholders before entering merger talks with Kroger.

Still, the grocery chains disclosed the payment “as part of the deal” when they announced their deal Oct. 14, and Washington state officials said the dividend would hurt consumers by draining company reserves and should be blocked until the deal is done.

King County Superior Court Judge Ken Schubert said the state failed to show that the dividend involved an agreement between Albertsons and Kroger that would violate federal antitrust laws.

He said Albertsons decided to issue the dividend on their own and that Kroger’s only contribution was to insist that the dividend did not exceed $4 billion, which he said would weaken the financial condition of the business he was buying. “Frankly, Kroger didn’t care if there was a special dividend one way or the other,” Judge said.

Ted Hassi, a lawyer for Albertsons, told the judge that delaying the dividend would make it difficult for the company to get the money back to shareholders by January 1, the start of a new tax year.

Kroger said it was satisfied with the court’s decision and reiterated that it was committed to working with regulators to close the deal. The combination “will deliver compelling benefits to customers, associates and communities,” Kroger said in a statement.

Albertsons continues to believe that the Washington Attorney General’s claim “is without merit and provides no legal basis to prevent the payment of a dividend which has been duly and unanimously approved by Albertsons Cos.” Board fully briefed,” the company said in a statement.

Several other states have also argued that the payments would weaken the company’s ability to compete if its takeover by Kroger is blocked.

A federal judge in the nation’s capital on November 8 refuse a first request for California, Illinois and the District of Columbia to temporarily freeze the dividend. But attorneys general in those states are now asking U.S. District Judge Carl Nichols to issue a preliminary injunction — exactly what the Seattle judge denied.

The AGs told Nichols in a court filing on Saturday that “new evidence” and “new arguments” support their position that if the dividend is paid now, it “will likely render Albertsons unable to compete as strongly as it can today, in violation of federal and state antitrust laws.

Albertsons said it would pay the dividend using $2.5 billion in cash, with the rest of the money coming from loans. Payment to investors was originally scheduled for Nov. 7, but was temporarily halted by a Seattle judge.

Cerberus originally purchased the grocer in 2006 and currently owns a roughly 28% stake.

Kroger and Albertsons are the two largest traditional supermarket chains in the United States, with significant overlap in key state markets such as California, Washington, Colorado, Texas and Illinois.

At the same time, businesses face fierce competition from mass-market retailers and warehouse clubs that sell food as well as general merchandise. Kroger ranks second in grocery market share after walmart Inc., according to Numerator, a market researcher. Albertsons is fourth after Costco wholesale company

The U.S. Senate Judiciary Committee’s antitrust panel held a hearing on the Kroger-Albertsons deal on Nov. 29 during which several senators debated whether the combination should be allowed to close.

While senators lack the ability to derail the merger, their opposition adds to the controversy swirling around the deal, which is also facing resistance from consumer groups and a union representing employees of both. grocers.

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