VANCOUVER, Wash. (KOIN) — The attorney general in Washington State is launching a legal fight against both Albertsons and Kroger.
The two grocery store giants announced Kroger’s plan to buy Albertsons, which owns Safeway, last month. Kroger also owns Fred Meyer and QFC.
If the federal government approves the deal, it could have a big impact on folks in the Pacific Northwest.
Washington Attorney General Bob Ferguson is the first leader to file a lawsuit to slow this merger. He, and six other attorneys general around the country, sent a letter to Albertsons urging them to not pay out $4 billion to stockholders, money that was promised to stockholders when the merger was announced. KOIN 6 News learned that Ferguson and his team almost immediately filed a lawsuit when Albertsons responded and said they would not delay paying the dividend on Nov 7.
“When you’re up against those corporations, you know you have to move fast, you’ve gotta know what you’re doing, and sometimes a letter doesn’t get it done,” said Ferguson.
The 19-page complaint was filed Tuesday in King County court. On Thursday, the attorney general and his team will go before a court commissioner and ask for a temporary restraining order to block Albertsons from issuing the payout.
The lawsuit claims that federal financial records show Albertsons doesn’t have $4 billion and would have to take out a loan to pay shareholders.
The attorney general’s office argues the move could crush Albertson’s financially, thus harming consumers, saying it has the potential to reduce the company’s ability to buy inventory such as baby food, and stock shelves for consumers who need to feed their families. The office also says that a vast majority of the shareholders aren’t individual people, claiming that 75% of the money would go to private financial firms.
“Everything about this raises red flags, honestly. The fact that three-quarters is going to a private equity firm, the fact that it’s a part of this proposed merger, the fact they have to borrow money to make it happen, all these raised red flags,” said Ferguson. “That’s precisely why a court should slow this down, put that on pause, and let the regulators, like the federal government in my office, review this proposed merger and see if it’s lawful or not.”
KOIN 6 also reached out to Oregon Attorney General Ellen Rosenblum to see if the merger gives her cause for concern and if she supports Ferguson’s legal action, KOIN 6 received this statement:
“Albertson Companies proposed merger with The Kroger Co. has the potential for a significant impact on Oregon consumers and must be thoroughly reviewed by state and federal antitrust enforcers. Washington’s suit is an attempt to maintain the financial status quo while this important review takes place. Attorney General Rosenblum strongly supports the efforts of the Washington Attorney General to protect customers in the Northwest and is considering her legal options with respect to the excessive shareholder dividend Albertson’s plans to distribute next week.”
KOIN 6 reached out to both Albertsons and Kroger to ask about the suit. An Albertsons Companies spokesperson provided this statement:
“The lawsuit brought by the Washington State Attorney General is meritless and provides no legal basis for canceling or postponing a dividend that has been duly and unanimously approved by Albertsons Cos.’ fully informed Board of Directors. As Albertsons Cos. stated publicly when it announced its Board-led review of strategic alternatives in February, capital return strategies were among the potential options to enhance growth and maximize shareholder value. The special dividend announced on October 14 is the means by which we are independently executing our longstanding capital return strategy and is scheduled to be paid to Albertsons Cos.’ stockholders on November 7. It is not contingent on our merger with Kroger and is not in any way a condition to Albertsons Cos.’ or Kroger’s obligation to consummate the proposed merger – it will be paid regardless of whether the merger is completed. The allegation that this dividend will somehow hinder our ability to compete in the marketplace is also meritless. Given our financial strength and positive business outlook, we are confident that we will maintain our strong financial position as we work toward the closing of the merger. Additionally, payment of the special dividend will not hinder Albertsons Cos.’ ability to continue investing in our stores and technology to provide an even better shopping experience while we continue to operate as an independent company, and it will not impact the agreements that we have made with unions representing our associates to increase wages and benefits. Our planned combination with Kroger will provide significant benefits to consumers, associates, and communities and offers a compelling alternative to larger and non-union competitors.”