A King County Superior Court in Washington state has granted Attorney General Bob Ferguson’s motion for a nationwide temporary restraining order that blocks Albertsons’ $4 billion payment to shareholders that was to happen this Monday.
The order remains in effect until November 10, unless within that time, an order is entered extending or dismissing the temporary restraining order. A hearing on the State of Washington’s request for a preliminary injunction is scheduled for November 10.
Ferguson filed suit Tuesday to block Albertsons from "enriching its shareholders with a $4 billion payout before a proposed merger with The Kroger Co. can be reviewed by state and federal antitrust enforcers." Ferguson argued the payment risked "severely undercutting" the retailers ability to compete during the lengthy time period government regulators would scrutinize the merger.
According to Securities & Exchange Commission filings, the $4 billion dividend exceeds Albertsons’ cash on hand, said Ferguson. Albertsons revealed in a recent filing that it will pay for the dividend with $2.5 billion in cash on hand and borrow the rest.
“Putting the brakes on this $4 billion payment is the right thing for Americans shopping at their local grocery store,” said Ferguson in a statement. “Thanks to my team for their usual excellent job holding powerful interests accountable.”
Albertsons Cos., meanwhile, seeks to overturn the restraining order as quickly as possible and contends the temporary order was based on the incorrect assertion that payment of the special dividend would impair its ability to compete while its proposed merger with The Kroger Co. is under antitrust review.
“Albertsons Cos. continues to maintain that the lawsuit brought by 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 canceling or postponing a dividend that has been duly and unanimously approved by Albertsons Cos.’ fully informed Board of Directors,” the retailer said in a statement. “Albertsons Cos. is a thriving business which has delivered over $75 billion in revenues in the rolling four quarters ended September 10, 2022, following strong performance of $71.9 billion in revenues in fiscal 2021. Albertsons Cos. is well-capitalized, with limited debt and significant free cash flow and is in a strong position financially. The size of the dividend reflects the Company’s strength, rather than the illogical and damaging accusation that it is an attempt to weaken the Company.”
Albertsons said that its plan to return capital to stockholders is part of its long-stated capital-return strategy. "The Company remains fully committed to investing in the associates, stores, and digital capabilities that have made its recent growth and strong performance possible," it said in a statement. "Albertsons Cos. is confident that it will continue to make strategic progress following the payment of the Special Dividend, given its strong cash flows and low debt profile. After payment of the Special Dividend, Albertsons Cos. will have approximately $3.0 billion of liquidity, including approximately $500 million in cash and approximately $2.5 billion available under its already existing asset-based lending facility, and expects to continue to generate strong revenues and positive free cash flow, furthering increasing liquidity."
Related: State Attorneys General Sue to Block Albertsons' Payout; Washington Sues to Block Albertsons Payout.