California AG moves to halt $4 billion shareholder payout in Kroger-Albertsons merger

California Attorney General Rob Bonta has joined a legal effort to block grocer Albertsons from paying a $4 billion “special dividend” to shareholders ahead of its proposed merger with rival supermarket chain Kroger.

Bonta and attorneys general from Illinois and the District of Columbia filed a preliminary injunction Thursday morning in the U.S. District Court for the District of Columbia. If approved, the motion would delay the $4 billion payment while the court reviews the states’ arguments that the dividend would hamstring Albertsons and prevent it from competing with Kroger while regulators continue to review the merger — a process that legal experts estimate would take at least a year.

“Right now, Albertsons seems more concerned with prematurely putting cash back into the hands of its shareholders than protecting consumers’ access to fresh and affordable food, and frankly, I find that more than a little alarming,” Bonta said in a statement.

Between them, the two companies own over 800 stores across the state under various banners. National chain Kroger owns California brands Ralphs, Food 4 Less and Foods Co. Albertsons owns Safeway, Vons and Pavilions.

The $24.6 billion deal, announced in October, would be the second major merger between grocery chains in California in the last decade. The first, when Albertsons bought Safeway in 2015, ended in bankruptcy, layoffs and store closures.

Opponents of the merger, including Bonta, argue that a $4 billion dividend payment would drain Albertsons’ cash and damage its ability to compete. The decrease in competition could lead to higher grocery prices. Albertsons’ inability to invest in its stores and workers could mean layoffs, wage stagnation and deteriorating working conditions, Bonta’s office argues.

This latest motion follows a lawsuit filed in November by the three attorneys general, which asked the same court to delay the payment of the dividend, originally scheduled for Nov. 7. That request for a temporary restraining order was denied. But a court in Washington state’s King County issued a restraining order that’s set to expire on Dec. 8. A preliminary injunction would be a longer term solution for blocking the payout.

When asked for comment on this latest filing, an Albertsons spokesperson deferred to a Nov. 8 statement released after the D.C. court denied the initial request for a restraining order. The company asserted that it “remains fully committed to investing in the associates, stores, and digital capabilities that have made its recent growth and strong performance possible.”

This story was originally published December 1, 2022 at 2:48 PM.