The proposed merger of the Albertsons and Kroger supermarket chains hit a rough patch in November when the state of Oregon filed an amicus brief supporting Washington state’s opposition to issuing $4 billion in dividends to Albertsons’ shareholders before the companies’ $20 billion merger.
The payout is regarded by some as a violation of antitrust laws put in place as safeguards to prevent smaller, independent grocery stores from getting edged out of business.
The Oregon Attorney General, Ellen Rosenblum, filed the amicus brief through the agency’s antitrust office to support the state of Washington’s position.
Albertsons is the parent company of Safeway, while QFC and Fred Meyer both come under the Kroger umbrella. Rosenblum expressed concern that four QFC, 51 Fred Meyer, and 121 Albertsons stores would be adversely affected if the merger proceeds. She urged delaying paying dividends.
Bob Ferguson, the Attorney General of Washington, stated that both grocery stores have a total of 330 locations in Washington alone, far outpacing their competitors.
According to The Seattle Times, Superior Court Commissioner Henry Judson issued a temporary ruling in King County blocking the payments to shareholders. That delay will allow the court to determine whether the proposed acquisition is lawful and ready to proceed.
Oregon’s Department of Justice cited in the brief that “competition and consumer welfare in Oregon as well as other jurisdictions” will be affected adversely by the dividend payout prior to the adjudication of the antitrust litigation.
The payments will be stayed during the pendency of the court’s proceedings regarding the antitrust allegations. Ferguson alleged that according to documents filed with the Securities and Exchange Commission (SEC), cash-strapped Albertsons has just over half of the amount to be paid out to shareholders. The company would need to turn to lenders to borrow the balance for shareholder dividends.
In their amicus brief, Oregon’s Department of Justice claims the pending merger of the supermarket giants could interfere with “the economic dynamism that competition promotes.”
Thus far, the state of Oregon’s intervention has solely been about dividend payments. But the content of the brief also clarifies that Rosenblum remains uneasy about the potential ramifications of the merger for the two Pacific Northwest neighbor states.