On Nov. 8, as midterm elections were underway across the country, a Trump-appointed judge in Washington, D.C., denied a motion for a temporary restraining order meant to halt the supermarket chain Albertsons from moving forward with a $4 billion "special dividend in connection with signing of the merger agreement" with the supermarket chain Kroger.
In a letter sent to Federal Trade Commission (FTC) Chair Lina Khan, 26 organizations, including the American Economic Liberties Project, the Center for Economic and Policy Research and the United Food and Commercial Workers (UFCW) International Union, which represents more than 100,000 Albertsons and Kroger employees, expressed concerns that the merger would unduly impact marginalized Americans.
"These monopolistic machinations will inevitably cause worker layoffs, impose downward pressure on wages and other job standards, raise food prices for hard-hit consumers, increase the prevalence of food deserts in lower-income communities and the number of food-insecure Americans, and squelch competition in this essential industry," the letter read.
It remains a possibility that the special dividend may be denied.
When Albertsons first announced the proposed special dividend in an October news release, leadership from UFCW Local 400 immediately flagged its timing, as well as its connection to the merger, as "unusual," according to the letter sent to the FTC.
Cerberus Capital Management, a private equity firm, has been the primary shareholder at Albertsons since its leaders reportedly "paid $350 million in 2006 for struggling Albertsons stores as a real estate play." While Albertsons' financial outlook is sunnier than it was 16 years ago, according to filings with the Securities and Exchange Commission, the dividend payout would exceed its cash on hand. Moreover, it would surpass Albertsons' last 10 years' worth of profits and be 57 times greater than historic dividends extended by the supermarket, per the union.
Why, exactly, would a company extend a dividend payout that is greater than its apparent cash on hand? The letter sent to the FTC characterized the move as "out-and-out looting of the company by a consortium of investors."
"It is seemingly a brazen attempt to manufacture new facts on the ground by destabilizing Albertsons' competitive position and jeopardize the FTC's ability to fully exercise its statutorily-mandated antitrust oversight," the letter said, "because the self-sabotaged shell of Albertsons that remains will likely argue that it will fail if the merger is rejected."
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To combat such a scenario, D.C. Attorney General Karl A. Racine filed a lawsuit on Nov. 2 "asking that the Court block Albertsons from issuing the payout to shareholders until a full review of the proposed merger agreement can be completed and is seeking a temporary restraining order (TRO) for immediate relief."
This suit was joined by the offices of the attorneys general for the states of California and Illinois and filed under seal in the U.S. District Court for the District of Columbia.
However, Judge Carl Nichols — who clerked for Supreme Court Justice Clarence Thomas from 1997 to 1998 and was appointed to the U.S. District Court for the District of Columbia by former President Donald Trump in 2018 — gave Albertsons the greenlight to continue, according to court documents.
As Bloomberg Law reported, Nichols rejected a claim by the attorneys general that the companies had violated antitrust laws by agreeing to pay a dividend as part of the merger deal, finding instead that Albertsons decided to make the payment "unilaterally."
The suit also claimed that the dividend payment, which Albertsons plans to fund in part with $1.5 billion in debt, would leave the company without enough cash to compete if the deal was blocked due to antitrust concerns. Nichols said the attorneys general had presented "insufficient evidence" to back up their claim.
The judge noted that the company had reported strong earnings, and the dividend payment had been vetted by investment banks and approved by Albertsons's board of directors. Halting the payment would "interfere" with the board's decision and harm shareholders, Nichols found.
"It is unfortunate that Judge Nichols came down on the side of a handful of ultra-wealthy board members and shareholders instead of the countless essential workers whose livelihoods are threatened by this outright looting of Albertsons"
In a Nov. 8 statement, representatives from UFCW Local 400 condemned Nichols' decision — but they haven't given up hope yet.
"It is unfortunate that Judge Nichols came down on the side of a handful of ultra-wealthy board members and shareholders instead of the countless essential workers whose livelihoods are threatened by this outright looting of Albertsons," the statement read. "To be clear, the unprecedented $4 billion special dividend sought by Albertsons remains halted under a temporary restraining order issued by a King County Superior Court commissioner in Washington state and today's ruling has no bearing on that case."
The statement referred to the fact that Washington state Attorney General Bob Ferguson also filed a suit in state court seeking to stop the payout. Last week, King County Superior Court Commissioner Henry Judson approved a temporary restraining order blocking Albertsons from paying a special dividend while the court determines if the payout violates state antitrust laws.
"We applaud Attorney General Karl Racine and his staff for standing up for grocery workers and American consumers by bringing this lawsuit to fruition," the statement continued. "We will continue to put every resource at our disposal to prevent this cash grab and protect the thousands of union workers who will be left out in the cold if this deal goes through."
Salon Food reached out to Albertsons and Cerberus, but requests for comment weren't returned prior to press time.
Update: In a Nov. 11 email, a representative from UFCW 3000 told Salon Food that the temporary restraining order issued in King County, Wash., has been extended through Nov. 17, when there is a scheduled hearing with witnesses planned. Follow Salon Food's ongoing coverage here.
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