FILE - Kroger grocery store

(The Center Square) – Washington State Attorney General Bob Ferguson has filed a lawsuit to block Albertsons Companies Inc. from paying $4 billion in dividends to shareholders before closure of its proposed merger with the Kroger Company, including asking for a temporary restraining order against the scheduled Nov. 7 payout.

Last month, the companies agreed to Kroger buying Albertsons for $34.10 a share in a deal valued at $24.6 billion. Cincinnati, Ohio-based Kroger is the second-largest grocer by market share in the United States, and Boise, Idaho-based Albertsons is the fourth-largest.

“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 statement on his lawsuit filed Tuesday in King County Superior Court. “Free enterprise is built on companies competing, and that competition benefits consumers. Corporations proposing a merger cannot sabotage their ability to compete while that merger is under review.”  

Ferguson was among the half-dozen attorneys general last week who sent a letter to Albertsons requesting the company delay paying the dividend while regulators examined the planned merger with Kroger. The letter threatened legal action if Albertsons did not delay.

The grocery chain rejected the request in an Oct. 28 letter, telling the attorneys general that the payment is independent of the merger and part of a plan to return capital to shareholders.

“Albertsons is not aware of a legal basis that would require it or even permit it to cancel or postpone a dividend that has been duly approved by its fully informed board and announced to the financial markets,” the letter stated.

To do otherwise would be irresponsible, Albertsons argued.

“To cancel or even postpone the Special Dividend would expose Albertsons to significant legal and financial liability,” the letter said. “Returning value to its shareholders is well within the discretion of the Albertsons’ board and consistent with the Company’s obligations to its shareholders, as well as its longstanding strategy. Accordingly, Albertsons cannot comply with the States’ request to delay payment of the Special Dividend.”

The Center Square reached out to Albertsons and Kroger for comment on Ferguson’s lawsuit but did not receive a response.

Together, Albertsons and Kroger would be second to Walmart in terms of grocer market share. The two have almost 800,000 employees in nearly 5,000 stores across 48 states and the District of Columbia.

The two grocery powerhouses own other companies with stores in Washington. Albertsons owns Safeway and Haggen, while Kroger owns QFC and Fred Meyer. There are 216 Albertsons and Safeway stores in the Evergreen State and 114 Kroger-owned Fred Meyer and QFC stores.

Staff Reporter

Brett Davis reports on Washington state government for The Center Square. He previously worked for public policy organizations the Freedom Foundation and Washington Farm Bureau, as well as various community newspapers.