KING COUNTY, Wash. — Editor's note: The above video on the Albertsons-Kroger merger originally aired on Oct. 31, 2022.
A King County judge granted a temporary restraining order blocking Albertsons from making a $4 billion dividend payment to investors on Thursday evening.
Washington State Attorney General Bob Ferguson sued on Tuesday to stop the payment while Albertsons' merger with Kroger Co. is under review, saying it could jeopardize the company's ability to do business and threaten jobs.
According to Securities & Exchange Commission filings, the $4 billion payment exceeds Albertson's cash on hand, Ferguson said.
The attorneys general of California, Illinois and the District of Columbia also sued to stop the payment.
Kroger Co. announced its plan to buy Albertsons for $20 billion last month. The deal is expected to close in early 2024 if it's approved by the Federal Trade Commission and the Department of Justice and survives any court challenges.
The merger agreement included a special dividend of up to $4 billion -- or $6.85 per share -- that Albertsons had previously scheduled to pay its shareholders Monday, Nov. 7.
A spokesperson responded to the lawsuit, calling it "meritless" and saying the dividend payout is not contingent on the buyout with Kroger and will not hurt the company's ability to compete in the marketplace.
"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,” the spokesperson said in part.
The company said it would seek to overturn the ruling as soon as possible.
The attorneys general also say it’s unclear if the deal will be approved, because federal and state laws forbid mergers that substantially lessen competition. Together, Albertsons and Cincinnati-based Kroger would control around 13% of the U.S. grocery market.