The Washington State Supreme Court has ruled that a temporary restraining order preventing payment of Albertsons’ proposed $4 billion dividend can remain in place during a review of a lower court’s decision.
As previously reported, Washington State Attorney General Bob Ferguson on Nov. 1 had sued to halt the proposed dividend, arguing that it would leave the company in a weaker position to compete against Kroger as those two companies prepare to merge, and that it would violate antitrust law and the Consumer Protection Act.
After a state superior court ruled that the dividend payment could go forward, Ferguson earlier this month appealed to the state Supreme Court and requested an emergency extension of the restraining order.
In issuing the extension of the restraining order, the Washington State Supreme Court said the question of whether the planned dividend was the result of a coordinated effort between Kroger and Albertsons “turns on disputed questions of fact and competing interpretations of the Consumer Protection Act,” and that a careful review of the lower court’s decision is required.
“The State does not make a compelling case at this juncture that it will prevail in the end, but the issue is at least debatable [in this case],” the Washington Supreme Court said in its ruling extending the stay.
Albertsons Cos. on Friday said it filed a motion to expedite the Washington Supreme Court’s review.
“Albertsons Cos. continues to believe that the claim brought by the Attorney General of the State of Washington, and the similar lawsuit brought by the attorneys general of California, Illinois, and the District of Columbia, are meritless and provide no legal basis for preventing the payment of a dividend that has been duly and unanimously approved by Albertsons Cos.’ fully informed board of directors,” the company said in a statement.
“Plaintiffs have continued to investigate the circumstances surrounding the decision to issue the special dividend and the potential effects that its payment and other restrictions defendants’ merger agreement places on Albertsons are likely to have on competition, workers and consumers, during the pendency of the merger review and beyond,” the states said in the filing, according to a report on Seeking Alpha.
Albertsons had announced the planned dividend at the same time it announced its planned merger with Kroger, but it has since said the two events are not related. Albertsons would have preferred to issue a stock buyback offer to distribute cash to shareholders, but instead opted for the dividend because that could be executed without interfering with the merger, according to court filings.
Albertsons said it will fund the dividend with $2.5 billion of its $3 billion cash on hand, plus $1.5 billion funded by its line of credit. This will leave Albertsons with $500 million in cash on hand and $2.6 billion remaining in its line of credit, the company said.
Colorado Attorney General Phil Weiser, who filed an amicus brief in support of Washington State in its suit to block the dividend, is also leading a multistate investigation into the merger.
As previously reported, Cincinnati-based Kroger Co. and Boise, Idaho-based Albertsons Cos. have agreed to combine in a transaction valued at about $24.6 billion, and to potentially divest hundreds of stores into a spin-off company to satisfy antitrust concerns.
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