Bonta urges Albertsons to delay $4B investor payout until after merger review
California Attorney General Rob Bonta and other state attorneys general Wednesday sent a letter demanding that Albertsons delay a $4 billion payout to stockholders until state and federal regulators complete their review of its proposed merger with Kroger.
Albertsons and Kroger employ more than 700,000 workers in communities across the country. State attorneys general say they want to ensure that the proposed merger of the two grocery giants does not result in higher prices for consumers, suppressed wages for workers or other anticompetitive effects.
With regulatory approval of the merger far from assured, this "special dividend" is premature and stands to dramatically hamper Albertsons' ability to compete, Bonta said.
"Californians are feeling the high cost of inflation every time they pull out their wallet at the grocery store checkout," Bonta said in a statement.
"With nearly 5,000 stores between them, Albertsons and Kroger are two of the largest grocery chains in the United States. Their proposed merger requires careful review — to ensure their customers and employees do not pay a price through higher grocery bills, food deserts, and lower wages.
"My colleagues and I demand that Albertsons delay its planned $4 billion payout to investors until review of the proposed merger is complete. I, frankly, have a hard time seeing how Albertsons would be able to continue to compete — as it is obliged to do during the pendency of merger review — after giving away a third of its market share."
In the letter, the six attorneys general expressed strong concern with Albertsons and Kroger's joint announcement that Albertsons will pay stockholders a cash dividend of up to $4 billion on Nov. 7. Federal and state antitrust laws forbid parties from entering in agreements that substantially lessen competition or unreasonably restrain trade.
Pre-merger notification requirements also prohibit "gun jumping" — the practice of improperly engaging in joint decision-making by parties pending merger review. The planned dividend payment would substantially impact Albertsons cash flow, making it difficult to continue to compete with Kroger ahead of the merger, according to the letter.
The United Food and Commercial Workers union lauded the move by the attorneys general — issuing a statement on behalf of five UFCW locals and Local 38 of the Teamsters that praised the attorneys general "for their leadership and action to protect workers and consumers in our state."
"In part of the proposed merger announced by Kroger and Albertsons less than two weeks ago, the companies buried that Albertsons is planning a $4 billion payout to shareholders," the union statement said.
"Today (Wednesday), six attorneys general including CA and WA pushed back on Albertsons to protect workers and consumers by demanding the companies stop the issuance of the special dividend until regulatory review of the merger is complete.
"We expect the CEOs to respond positively to the attorneys general by the end of the day on Friday and stop the issuance of the special dividend. Any effort to rush this payment threatens thousands of jobs of essential grocery store workers and millions of shoppers who would suffer from reduced competition, reduced choice and increased costs in markets across the United States."
Grocery prices rose 12.2% from last summer to this summer, the biggest jump in over 40 years, according to Bonta.
In San Diego County, workers at Albertsons, Vons and Kroger are represented by UFCW Local 135. Mike Ryan has been a member of Local 135 for 34 years. He said he’s seen this before and says it’s not good, telling KPBS, "The first thing that you think about when you talk about a company coming in to purchase our company is store closures."
Ryan said workers have sacrificed a lot in the past couple of years working through a pandemic, including losing some of their own, citing the case of 40-year-old Dale Campbell, a local grocery store manager who died after getting COVID on the job. Ryan asked that those making the decisions carefully consider their employees and customers.
"You have a lot of people who have worked really really hard over these years to help you [the stores] profit off of our sacrifice," Ryan said. "I would highly recommend you take that into consideration before making you make any deals that could sacrifice jobs."