California attorney general asks Albertson to delay payment of $4 billion in dividends ahead of possible Kroger merger

California law firm. General Rob Bonta and his colleagues in several other states on Wednesday asked Albertsons Cos. to delay paying investors a $4 billion dividend until after the company merges with rival supermarket chain Kroger Co. Reviewed by the Federal Trade Commission.

This month, Kroger disclosed its $20 billion deal to buy Albertsons — a deal that would combine several chains and operate in Southern California, including Ralphs, Pavilions and Vons. as part of October. On Oct. 14, Cincinnati-based Kroger said Albertsons would pay a special cash dividend of up to $4 billion to shareholders on Oct. 14, a record number. 24. Scheduled to be paid in November. 7.

The potential combination of the two chains comes at a time when food costs are soaring amid rising inflation. The merger drew strong criticism, including from Los Angeles-based United Food and Commercial Workers Local 770, which represents more than 20,000 members. On Saturday, Local 770 issued a statement against the dividend and called on elected officials and regulators to halt payments to Albertsons, saying it would lead to “devaluation of the company at a time when consumers face severe inflation.”

On Wednesday, Bonta and the attorneys general for Arizona, Idaho, Illinois, Washington and the District of Columbia wrote in a letter to the company’s CEO that they are committed to ensuring the planned merger “will not lead to higher prices for consumers, suppress worker wages or other anti-competitive effects.”

The attorney general noted that Boise, Idaho-based Albertsons must legally continue to compete with Kroger while the merger would be subject to state and federal scrutiny, the attorney general wrote, “paying a dividend of this magnitude would hinder its the ability to do so meaningfully”.

When asked about the letter, a spokesman for Albertsons, which has 2,273 stores, said in a statement that after the dividend, the company would “continue to be well-capitalized, with healthy debt and strong free cash flow.”

“Our planned merger with Kroger will provide significant benefits to consumers, employees and communities, and provide a compelling alternative to large and non-union competitors,” said the statement from Albertsons, which owns multiple grocery stores store brands, including Vons and Pavilions stores in California.

Kroger, which operates 2,800 stores and represents more than two dozen brands — including Ralphs — did not immediately respond to a request for comment.

Southern California, the largest grocery market in the U.S., will likely feel the effects of Kroger’s merger with its smaller rival in large part. With an eye toward overcoming expected political and regulatory issues, the grocery chain said they would divest some stores. Kroger said in October that as many as 375 Albertsons locations would be spun off into a separate public company. 14.

Bonta and his colleagues gave Albertsons an Oct. 28 notification to the attorney general whether they intend to cancel the dividend and delay any such payments until a regulatory review is complete and the transaction is completed.

If approved, the deal is expected to close in early 2024, Kroger previously said.

Shares of the two companies traded on the New York Stock Exchange and had quiet days on Wall Street. Shares of Kroger closed at $45.44, up about 1.5% on the day, while shares of Albertsons fell 1.3% to $20.43.

Leave a Reply

Your email address will not be published. Required fields are marked *