WA AG criticizes $4 billion dividend by Albertsons ahead of Kroger merger

Barely a week after Albertsons and Krueger announced a massive and “messy” grocery merger, Albertsons’ plan to pay a $4 billion dividend to investors is attracting more criticism from shoppers, workers and state officials, including Washington State Attorney General Bob Ferguson.

Ferguson on Wednesday joined peers in four other states and the District of Columbia in a letter urging Albertsons, which owns Safeway, Kroger, which owns the Qatar Financial Center and Fred Mayer, to delay the $4 billion dividend.

The letter was penned by Washington Attorney General Carl Racine on behalf of the District of Columbia, Arizona, California, Idaho, Illinois and Washington. Briuna Aho, a spokeswoman for the Washington state attorney general’s office, also confirmed Wednesday that the office will review the merger.

In the letter, Racine described the $4 billion dividend as potentially a “massive, inappropriate donation to some shareholders” that could undermine Albertsons’ performance in a “very difficult market.”

The letter notes that the proposed $4 billion dividend, which was tucked away in the merger announcement, roughly equals the total money Albertsons reported owning in its most recent financial report, and goes on to imply that making this payment “deprives Albertsons of the money it needs to operate effectively.” competitive.”

This is a major concern among observers of the more than $20 billion merger.

Some critics believe that a merger may lead to higher consumer prices and job losses as the merging companies seek to increase profits by cutting costs.

There are also concerns that the deal could lead to the closure of some of the hundreds of overlapping Kroger and Albertsons sites that retailers will be required to sell in order to gain regulatory approval.

These shutdown fears are especially high in the Seattle area, where retailers have an unusually large number of stores, sometimes less than a mile from each other.

Paying $4 billion “essentially puts all of us at risk of not having jobs or having to close stores because without capital, how are they going to buy the products we sell off the shelves?” says Keung Barry, a South Auburn Safeway worker and member of the UFCW Local 3000, which represents nearly 26,000 workers at 265 Kroger and Albertsons locations in Washington.

That fear echoes Seattle-based Leo Griffin, who works regularly at Safeway, and Fred Meyer at Ballard. Griffin fears that such massive payments could mean that local secure roads that are in desperate need of upgrades will be less likely to get them.

“It looks like they are trying to take money out of the deal that can benefit others later… especially in some of these stores [where] Just as it did in the aftermath of the Albertsons and Safeway merger in 2015, said Griffin, who was already concerned that the merger would lead to local store closures.

In the letter, Racine said he would seek an injunction blocking the payment if the Albertsons did not do so voluntarily, but it was not immediately clear whether the District of Columbia or individual states had the power to block such a payment. The letter asked Albertsons to respond by Friday whether it would cancel the payment.

In an emailed statement, an Albertsons spokesperson insisted that even after paying the dividend, Albertsons “will continue to be well capitalized with low debt and strong free cash flow. Given our financial strength and positive business outlook, we are confident that we We will maintain our strong financial position as we work towards closing the merger.”

It wasn’t clear on Wednesday exactly what legal authority states might use to stop the payment.

Nor was it clear how likely the Albertsons would stop paying. Cerberus, which bought Albertsons in the early 2000s and merged with Safeway in 2015, is said to have long wanted to exit the company, which is said to still own nearly a third, in part to satisfy its investors.

That final exit could happen through a merger with Kroger, but the deal is expected to take years before it gets approval from either federal regulators or a federal judge if regulators reject the deal and the companies take the merger to court.

Many industry analysts believe the latter scenario is increasingly likely.

“While Kroger and Albertsons believe they will get the required regulatory approval, we think they will face a sharp rise from both antitrust regulators and Congress,” wrote Aaron Sundaram, CFRA equity analyst who covers retail.

One big blow against smooth approval, Sundaram notes, is “the 2015 Albertsons-Safeway merger disaster where [some] Eventually, Albertson repurchased the divested stores.”

Given the possibility of delaying the merger, the $4 billion dividend is likely to be intended to “satisfy existing Albertsons investors and [keep] notes Jeff Green, a retail analyst at Hoffman Strategy Group who tracks the Seattle market.

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