Albertsons: D.C. Circuit Refuses To Pause Special Dividend

A Washington, D.C. Circuit court panel sided with Albertsons on Tuesday refusing to impose an emergency pause on the grocery chain’s planned $4 billion shareholder dividend filed in the court a month and a half ago.

The decision by U.S. Circuit Judges Patricia A. Millett, Cornelia T.L. Pillard and Florence Y. Pan addresses one of two injunctions filed against the supermarket company’s special dividend. The judges denied the motion by the three attorneys general of Illinois, California and D.C. because the “appellants had not satisfied the stringent requirements for an injunction pending appeal” to hold the shareholder payout.

Late last week, a similar temporary restraining order (TRO) of the dividend in the Washington State Supreme Court was extended allowing the state court more time to review the appeal by the state attorney general.

Albertsons has filed a motion to expedite the Washington State Supreme Court appeal review that is expected to come on February 9, according to a press release issued Wednesday by the company.

Kroger and Albertsons announced the special dividend during the two companies blockbuster announcement in October but have since pulled back from the notion that it is part of the $24.6 billion merger deal.

The special dividend became a point of contention soon after the merger announcement when a letter co-signed by the attorneys general of Idaho, Illinois, California, Washington, Arizona and Washington, D.C. asked Albertsons CEO Vivek Sankaran and Kroger CEO W. Rodney McMullen to delay the dividend payment until after federal oversight of the deal was completed. The attorneys general argued that the payout complicates the planned merger that is drawing significant federal scrutiny.

The CEOs did not heed the request and a pair of injunctions were filed in Washington State and in the D.C. Circuit court in early November. The D.C. Circuit panel’s “unsigned one-page order” reported by Law360 argued that appellants had not offered enough evidence that the stay on the dividend was necessary.

D.C. AG Karl A. Racine’s statement after filing the November 2 lawsuit stated, “Albertsons’ rush to secure a record-setting payday for its investors threatens District residents’ jobs and access to affordable food and groceries in neighborhoods where no alternatives exist. This would have a particularly devastating impact on struggling people and families with access to fewer grocery stores during a time of historically high inflation. My office will use all our authority to stop this cash grab and protect District workers, families, and consumers.”

In response, both Albertsons and Kroger have argued that state attorneys general have misinterpreted the $6.85 per common share special dividend and “misapplies basic accounting principles.” The company has no intention of financially depleting itself in the lead up to the planned merger of the two national grocery chains.

Albertsons representatives responded to the news this week by calling the Washington State AG restraining order and describing the similar injunction filed in the D.C. Circuit “meritless” and providing “no legal basis for preventing the payment.”

Tuesday’s decision further complicates the argument that inflationary pressure and a dilution of Albertsons value will benefit shareholders and hurt employees and consumers. Federal scrutiny of the merger remains on the table through the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights with Sen. Amy Klobuchar (D-MN) who has expressed interest in investigating the merger in Congress.