business news in context, analysis with attitude

Reuters reports that a Washington State court has again delayed a planned $4 billion dividend that Albertsons wants to distribute to its shareholders, putting it off a scheduled hearing until December 9.

This is the third delay imposed by the court.  The original hearing was supposed to be on November 10, then on November 17.

The temporary injunction was requested by Washington Attorney General Bob Ferguson, after Kroger announced that it would be acquiring Albertsons for $24 billion.  When the merger was announced, it also was disclosed that Albertsons would be paying its shareholders a $4 billion dividend in advance of any deal being completed (which is likely to take 18-24 months).

Albertsons maintains that the dividend would have been distributed regardless of whether it had a deal with Kroger, and was part of an extended effort to increase shareholder value.  Ferguson, along with a number of other attorneys general who filed separate suits in federal court, argues that paying out the dividend would hurt Albertsons' ability to compete in the event that the acquisition is not allowed to take place by the Federal Trade Commission (FTC).  But Albertsons has disputed that notion.

There continue to be concerns raised by opponents of the deal, who argue that a merger of the second and fourth ranked grocery retailers would be deleterious to competition.

Combined, the new company would have a 15.5 percent market share, second to Walmart's 20.9 percent of national grocery market share.  (Costco would remain in third place.)

“Albertsons Cos. continues to believe that the claim brought by the State of Washington 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,” the company said in a statement.

KC's View:

I find all of these arguments to be fascinating.  I'm sure that the folks at Kroger and Albertsons are absolutely convinced that they've got the rhetorical and legal arrows necessary to make this deal go through, and I'm also pretty sure that they were anticipating pushback from both the legal establishment as well as activists and legislators.   It will all come down to shareholder value vs. stakeholder value, and shifting definitions with which both regulators and businesses have to grapple.