A Washington State court has ruled in favor of Albertsons, denying a request by the state’s Attorney General Bob Ferguson for a preliminary injunction against the grocery retailer’s $4 billion ($6.85 per common share) special dividend payout to its shareholders. The supermarket retailer planned to deliver the payout ahead of its acquisition by Kroger, but the deal between the two grocery giants is currently undergoing regulatory review.
Ferguson’s lawsuit sought to halt payout of the special dividend until assessment of the merger is complete, but attorneys for Albertsons and Kroger argued that the payout was planned prior to discussion of the merger, according to the Seattle Times. Ferguson is expected to appeal the Dec. 9, 2022 ruling, and the court has extended a temporary restraining order until Dec. 19, 2022.
Judge Ken Schubert of the King County Superior Court ruled, “The State failed to show that Albertsons’ payment of the dividend will impair its ability to compete during regulatory review of the merger or harm competition in grocery retail markets in Washington State communities.”
According to the ruling, in an Oct. 18, 2022 Form 10-Q SEC filing, Albertsons noted that “The Special Dividend…will be funded using approximately $2.5 billion of cash on hand with the remainder in borrowings, leaving the grocer with approximately $500 million of cash on hand and $2.6 billion remaining in its line of credit.”
Similar lawsuits to halt the payout have been filed against Albertsons by attorneys general in the District of Columbia, California and Illinois. On Dec. 1, 2022, the AGs filed a request for a preliminary injunction against the payout. On Nov. 8, 2022 the U.S. District Court for the District of Columbia denied the request for a temporary restraining order against payment of the special dividend.
Opponents of the Albertsons-Kroger merger feel the deal will harm competition and hurt consumers. However, the companies have said that the merger will alleviate supply chain challenges, offer inflationary relief to consumers and provide enhanced personalization to the retailers’ customers.