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Albertsons told a coalition of attorneys general it won’t delay a large dividend payment. It also claims the dividend was planned before the merger and was “independent” of the merger.
However, Kroger’s own statement stands in contrast to the claim from Albertsons. In a news release announcing the deal, Kroger expressly said the dividend was part of the transaction: “As part of the transaction, Albertsons Cos. will pay a special cash dividend of up to $4 billion to its shareholders.”
Albertsons itself issued a news release saying the dividend was “in connection with” the proposed acquisition.
Idaho Attorney General Lawrence Wasden joined a bi-partisan group of his counterparts from four other states and the District of Columbia urging the company to delay the dividend payment. The DC attorney general appeared on CNBC and said it “could be a massive improper giveaway to certain shareholders.” Albertsons is controlled by a group of private equity investors led by Cerberus Capital Management.
“It provides near-term liquidity to all of its shareholders, which Albertsons had planned and was prepared to do regardless of any acquisition by Kroger,” Albertsons wrote in the letter, first reported by Bloomberg and later obtained by BoiseDev. “It reflects Albertsons’ independent decision to effectuate the capital allocation strategy it began evaluating with its advisors long before Kroger expressed interest in Albertsons.”
“The special dividend is not Kroger paying Albertsons to do (or not do) something, and it is not conditioned on the merger closing,” the letter said. “Albertsons is in strong financial condition today and will be in strong financial condition after the special dividend is paid.”
Albertsons echoed the letter’s sentiment in a statement to BoiseDev last week.
“The special dividend allows us to return cash to all of Albertsons Companies’ shareholders prior to the anticipated closing of the merger with Kroger in early 2024,” the spokesperson wrote. “Albertsons Cos. is well capitalized with strong free cash flow and expects to maintain its strong financial position as we work toward closing.”
Washington, DC Attorney General Karl Racine said last week that if Albertsons did not volunteer to delay the dividend, they could seek a court injunction to stop it. Albertsons wrote that cancelling the dividend would open it up to legal liability with shareholders, because they depend on the guidance provided.
The dividend of $6.85 per share is set to be paid on November 7th. Another dividend – a regular quarterly payment – is set for one week later on November 14th, of $0.12 per share.
The proposed acquisition of Albertsons by Kroger has met strong and immediate pushback. Hearings will be held in the US Senate. The group of attorneys general said they would also investigate the merger. Union groups are coming out against it.
It’s unclear if the Federal Trade Commission will take action against the acquisition. The agency just won in court to block a smaller acquisition, barring Penguin Random House from purchasing Simon & Shuster. The case marks a continuing push in recent years by the FTC, under Presidents Obama, Trump, and Biden, to challenge mergers the agency views as anti-competitive.
Updated: Story updated to reflect BoiseDev independently obtained the letter.