Albertsons shareholders may soon enjoy the benefits of the $4 billion dividend they were promised on November 7 as part of the chain’s merger agreement with another supermarket powerhouse, Kroger, which was confirmed on October 13. And then again they may not.
A bit of recent history – on November 1, a Washington State judge granted the state’s attorney general Bob Ferguson a temporary restraining order (TRO) to halt the special one-time dividend. That decision was overturned on December 9 by Superior Court Judge Ken Schubert who ruled that the payout would not weaken Albertsons’ financial standing or create higher prices. Ferguson then filed a successful appeal with the Washington Supreme Court, the state’s highest judicial body.
Originally the court set a February 9 date to hear argument from both sides, but after Albertsons asked for the review to be expedited, the Supreme Court moved the date to January 17.
Since with a day of the merger announcement, it has been a multi-fronted legal battle for Albertson to pay out the dividend to its shareholders. Clearly, legislators are irked that about 75 percent of that dividend will be paid to the chain’s six top investors, a consortium of private equity and real estate firms led by PE giant Cerberus Capital Management which alone controls almost 30 percent of Albertsons stock.
In his December 9 ruling, Judge Schubert noted that paying out such a large sum of money to a bunch of already wealthy investors might create bad optics, but he opined that the issuance of such a dividend would not weaken Albertsons’ ability to effectively compete in its marketplaces and broke no laws.
“It’s not like the two of them got together and said, ‘How can we screw the consumers of Washington state, or the nation?’ There was no such agreement,” Schubert stated in his decision, which was quickly appealed to the State Supreme Court by AG Ferguson.
And in a statement affirming the appeal, the Supreme Court noted: “The state does not make a compelling case at this juncture that it will prevail in the end, but the issue is at least debatable [in this case].”
In a separate lawsuit filed in Federal District Court in early November, Illinois, California and the District of Columbia also requested that the dividend be blocked. Judge Carl Nichol rejected that request but said he would not allow the dividend to be issued until the Washington State case had been adjudicated. The two states and Washington, DC filed a motion citing new evidence that would make their case stronger. This time, the DC Circuit Court would not grant a new TRO either.
From the outset, Albertsons has decried the legal actions that sought to block the dividend. In its most recent statement on the matter, a spokesperson for the Boise, ID-based retailer said: “Albertsons Cos. continues to maintain that the claim brought by the attorney general of 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 preventing the payment of the special dividend,” Albertsons’ position has been supported by favorable rulings in both Circuit and District courts in the District of Columbia and a Washington State court.”
So, the string has just about run out over the dividend controversy. Now the heavy lifting begins between the attorneys and the regulators, particularly the Federal Trade Commission. That will be a battle royale.