CINCINNATI — Albertsons Cos Inc. says it is trying to reverse “as quickly as possible” a court order delaying a $4 billion dividend that is an important first step toward Kroger’s acquisition of the Idaho-based grocery chain.
An Albertsons press release said the ruling was based on the “incorrect assertion” that the dividend will “impair its ability to compete” while regulators review the deal for antitrust compliance.
“Albertsons Cos. is well-capitalized, with limited debt and significant free cash flow and is in a strong position financially,” said the release. “The size of the dividend reflects the company’s strength, rather than the illogical and damaging accusation that it is an attempt to weaken the company.”
The Seattle court ruling comes as a federal judge in Illinois schedules hearings for a similar effort to derail the dividend. While the court actions could delay the merger’s planned completion date of early 2024, it will not derail the deal, predicted Scott Beck, a Xavier University professor who worked for Kroger’s data analytics unit before starting a customer analytics program at Xavier.
“This is a fairly massive merger,” Beck said. “There are a lot of questions. But I think everybody involved knew this was going to happen and they’re just going to execute against the plan until finally everybody can sign off on it.”
Beck said the court cases and a planned Senate hearing on the acquisition could force Kroger to modify terms, including the number of stores they have to sell to reduce market share in California, Washington state and elsewhere. He also thinks a downsizing of the dividend is possible and assurances from the companies that the combined companies won’t lead to food deserts.
“I think everything is on the table,” Beck said. “Whether it’s compensation, working with unions, store locations, all those things are going be up for discussion.”
Jim Russell agrees that Kroger might have to compromise with the deal’s critics to get the Federal Trade Commission to sign off on the merger. The portfolio manager at Bahl & Gaynor Inc. expects the dividend and the number of stores sold will be the most important issues for regulators.
“I think it’s probably going to be a negotiation on those two key issues and whether Kroger is still interested after that negotiation I think is an open question,” he said.
On one point, Beck and Russell agree: CEO Rodney McMullen will be up to the task.
“Rodney is a very quiet man, however very thoughtful and extremely strategic,” Beck said. “He’s a very patient man and wants to find something that works for everybody.”
