After grocery unions in Washington and California demanded a halt to plans to pay a $4 billion dividend to Albertsons shareholders, Washington Attorney General Bob Ferguson filed suit Nov. 1 to halt it, and was joined Nov. 9 by Oregon Attorney General Ellen Rosenblum.
The obscene “giga-dividend” was announced as part of a plan for Kroger to buy its competitor Albertsons for $24.6 billion. The two companies combined would control nearly 50 grocery chains, with 710,000 employees and 4,996 stores in 48 states. A number of grocery union locals are calling on the federal government to block that merger as a gross violation of anti-monopoly laws. In the Pacific Northwest the merger would mean Fred Meyer, Safeway, Albertsons and QFC would all be the same company, creating a monopoly in many areas.
The colossal dividend is further evidence of unlawful collusion between the companies, said seven UFCW locals and 20 other labor and nonprofit advocacy groups in a Nov. 3 letter to the Federal Trade Commission (FTC). The FTC is the government agency that will decide whether the merger is legal.
“It is seemingly a brazen attempt to manufacture new facts on the ground by destabilizing Albertsons’ competitive position and jeopardize the FTC’s ability to fully exercise its statutorily-mandated antitrust oversight, because the self-sabotaged shell of Albertsons that remains will likely argue that it will fail if the merger is rejected,” they said in the letter.
Normally, dividends are paid out to shareholders as a way to distribute a share of profits, but the proposed $4 billion dividend is equivalent to three-quarters of its cash reserves, plus another $1.5 billion in new loans. It would leave the company depleted of assets, and $6.55 billion in debt, not counting $4.7 billion in unfunded pension liabilities.
The unions say such an outsized dividend amounts to the looting of the company by a consortium of investors led by the private equity firm Cerberus Capital Management, which together own 70% of Albertsons. And they point out that if Albertsons intended to continue operating, it wouldn’t give away all its cash.
Washington Attorney General Ferguson agrees.
“Paying out $4 billion before regulators can do their job and review the proposed merger will weaken Albertsons’ ability to continue business operations and compete,” Ferguson said in a press statement explaining the lawsuit.
The dividend was supposed to be paid Nov. 7, but King County Superior Court judge Ken Schubert issued a temporary restraining order that is in effect at least through a Dec. 9 court hearing.
On Nov. 10, Oregon Attorney General Rosenblum asked permission to join the suit with an amicus brief. The brief points out that Kroger has 55 stores in Oregon and Albertsons has 121; the two currently compete against each other throughout Oregon. And in some Oregon cities—including The Dalles, Sandy, Tillamook and Florence—Albertsons and Kroger stores are the only major grocery retailers.
