The Washington State Supreme Court has ruled that Albertsons can pay its shareholders a $4 billion special dividend, refusing to even consider a case brought by state Attorney General Bob Ferguson.
The Seattle Times writes that this was “the last legal obstacle” to payment of the dividend, which Ferguson argued “could financially weaken Albertsons and lead to closures of locations of Albertsons and of Safeway, which Albertsons owns.” The Times writes that “in a terse, two-page ruling … the court declined to review the case or extend a temporary restraining order blocking the dividend.”
The dividend became an issue because it was announced at the same time as a proposed $24.6 billion acquisition of Albertsons by Kroger. While executives said that the dividend was unrelated to the merger, and was part of a previously announced goal to enhance shareholder value.
Key to opposition to the payment was an argument that if the merger does not go through, the dividend would leave Albertsons less able to compete independently.
“Albertsons Cos. will immediately begin the process of paying the Special Dividend and amounts will be distributed as soon as practicable to stockholders of record as of the close of business on October 24, 2022,” the company said in a statement.
“We respect the decision of the Court, but we are surprised and disappointed the Supreme Court decided not to hear this case,” Ferguson said in a statement Tuesday afternoon, adding, “This merger is far from a done deal. My team and I will be conducting a thorough review.”
The United Food and Commercial Workers (UFCW) also released a statement: “We are disappointed to see a ruling that favors a small number of ultra-wealthy shareholders over the many thousands of essential workers and millions of Americans who will be left to suffer the consequences of the outright financial looting of Albertsons. Despite this setback that allows the $4 billion dividend to be issued, the delay allowed the United States Senate to scrutinize the dividend payment as well as the mega-merger and alerted the public to the disastrous consequences if the merger were to go through.”
I’m willing to concede that the dividend was a separate issue from the acquisition, though the optics weren’t great, since they were announced at virtually the same time. But now the checks are being issued – with a particularly largely one going to Cerberus Capital Management and Apollo Global Management, the private equity firms with major positions in Albertsons.
The merger of the two companies is another matter, and the Federal Trade Commission (FTC) is expected to spend a year or more considering its implications in terms of both consumers and competitive issues. This may be a longer and tougher slog than some expect, since the current leadership at the FTC and the Biden administration have signaled a somewhat broader and tougher approach to such issues.
I think it is likely that the FTC will consider stakeholders as well as shareholders when scrutinizing the deal, and I would hope that it will shine a bright light on the impact a deal could have on the fees and allowances that a combined company may be able to charge suppliers. I’m not sure it is – or should be – as simple as just allowing for the divestment of a bunch of stores and then permitting a combined Kroger-Albertsons entity to go on its way.
I’m not saying that the FTC should reject the merger. In fact, if I had to bet, I’d wager that eventually it will go through, with some significant conditions. But I’d like to see a nuanced and comprehensive discussion of retail competition in America within the context of what the world actually looks like, not some antiquated construct based on how things used to be.
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