Albertson's Kroger Merger Could Eliminate Competition, Spike Costs: AG

ILLINOIS — Illinois Attorney General Kwame Raoul is among officials from six states asking a major grocery chain to hold off paying more than $4 billion in dividends to shareholders linked to a proposed merger with another major grocer until the group of states attorneys can review the deal.

Raoul and the other Attorneys General said Thursday that the proposed merger between Albertson’s and Kroger could severely reduce competition, which, in turn, could lead to higher food costs. The proposed merger between the two chains was announced on Oct. 14 when it was announced that shareholders would be paid a special dividend that Raoul and others say will total more than $4 billion.

The merger would have a big impact in the greater Chicago area for Jewel-Osco and Mariano’s, which are owned by Albertson’s and Kroger, respectively. Together the two chains have almost 5,000 stores across 48 states and the District of Columbia and have more than 710,000 employees.

Raoul said on Thursday that he is part of a bipartisan coalition of attorneys general who is calling for the two grocery chains to hold off on paying out the dividend until the proposed deal can be reviewed.

“The proposed merger between Albertsons and Kroger could severely reduce competition, lead to increased food prices at a time families are struggling to keep up, and worsen food insecurity impacting low-income and minority communities in particular,” Raoul said in the statement. “It is imperative that neither company act to potentially affect a merger outcome while state attorneys general continue our review.”

The coalition is also examining whether the special dividend or the merger could reduce good, high-paying jobs and hurt wages and benefits for workers, according to a news release. The private equity investors who control the grocery chains will have gained profits nine times larger than their original investments in 2006 if the merger is approved, Raoul said.

The special dividend is scheduled to be paid to shareholders on Nov. 7 at $6.85 per share, Raoul’s office said The dividend would total nearly $4 billion, which is more than two years of profits for the company, according to the news release.

Raoul and the coalition sent a letter to Albertsons and Kroger expressing concerns that the special dividend risks significantly limiting Albertsons’ ability to operate and properly compete with Kroger, which could seriously impact consumers, workers, and the grocery industry at large before regulators even have a chance to review the deal.

In a statement issued to Patch on Thursday, a spokesperson for Albertson’s said the partnership with Kroger will “provide significant benefits to consumers, associates, and communities and offers a compelling alternative to larger and non-union competitors.”

The statement added: The merger announcement and special dividend mark the successful outcome of the strategic review we launched in February, which considered a wide range of options to build on our success and deliver enhanced value for all our stakeholders. The special dividend allows us to return cash to all of Albertsons Companies’ shareholders. Following the dividend payment, Albertsons Cos. will continue to be well-capitalized with a low debt profile and strong free cash flow.

“Given our financial strength and positive business outlook, we are confident that we will maintain our strong financial position as we work toward the closing of the merger.”

A spokesperson from Kroger/Mariano’s did not immediately respond to a request from Patch for comment.