AG to investigate merger of Albertsons and Kroger
October 27, 2022, 8:36 AM
D.C.’s Office of the Attorney General will investigate the proposed $20 billion merger between grocery chains Albertsons and Kroger, and attorneys general in the District and five states want Albertsons, the owner of Safeway, to postpone a nearly $4 billion special dividend to shareholders.
“We’re deeply concerned about the level of concentration in essential industries, such as grocery stores. And we’re asking Albertsons to not proceed with the payout while we thoroughly assess whether this merger is anti-competitive, anti-consumer, or anti-work,” said D.C. Attorney General Karl A. Racine.
When the companies announced the proposed merger in October, Albertson’s said the special dividend of $6.85 per share would go out to shareholders Nov. 7. Racine said that if the merger is approved, private equity investors will have gained profits nine times larger than their original 2006 investments.
On CNBC, Racine said the dividend could amount to an “improper giveaway to certain shareholders” and needs to be reviewed.
Before Racine’s announcement of the probe, it was expected that U.S. antitrust regulators would likely heavily scrutinize the merger, especially as inflation has sent food prices skyrocketing. If approved by regulators, the deal could close in early 2024.
Racine said asking Albertsons to stop the dividend is the first step, and then the “entirety of the merger” would be reviewed to determine whether it might lead to even higher food prices.
If the merger goes through, Albertsons and Kroger together would control about 13% of the U.S. grocery market, according to J.P. Morgan analyst Ken Goldman.
The letter to Albertsons is signed by Racine, and the attorneys general of Arizona, California, Idaho, Illinois and Washington.
Earlier this month, members of Congress urged the Federal Trade Commission to block the merger of the chains that employ more than 710,000 people in 48 states.
Albertsons, which is based in Idaho, operates 2,273 stores in 34 states. In addition to Safeway, its brands include Jewel Osco and Shaw’s. Kroger, based in Ohio, operates 2,800 stores in 35 states, including the brands of Harris Teeter, Ralphs and Smith’s.
WTOP’s Colleen Kelleher and The Associated Press contributed to this story.