The Washington Attorney General has filed a lawsuit to block Albertsons from offloading $4 billion to shareholders before the review of their upcoming merger.
Albertson Companies Inc, which owns grocery store chains Albertsons, Safeway, Haggen, Kings, Tom Thumb, Vons, is looking to merge with The Kroger Company, currently the largest supermarket operator by revenue in the country. Together, the two would surpass Walmart in both number of stores and volume of product moved. Kroger currently operates over 2700 grocery stores, and Albertsons another 2200.
The proposed merger, a 24.6 billion transaction, is raising plenty of eyebrows. When Albertsons and Safeway merged just a few years ago, they had to sell off hundreds of stores to meet anti-trust regulations, only to seemingly acquire them all back shortly thereafter when they acquired the recently bankrupt Haggen chain. In the mix, they closed many locations, deeming them redundant or unprofitable.
Lawmakers and communities alike are concerned this merger will be the same but even more so. Between Safeway and Albertsons, and Kroger-owned Fred Meyers and QFC, many west-coast cities, even major cities like Seattle and Portland, will find themselves under a monopoly. The only competitor to those four in Washington, for instance, is Amazon-owned Whole Foods, which sells to a niche market and only has locations in high-rent areas. If the Albertsons-Kroger giant follows their previous pattern, any part of Washington not under a grocery monopoly would likely become a food desert.
Washington Attorney General Bob Ferguson believes that the objective of the proposed $4 billion shareholder payout is to put Albertson Company Inc’s finances in poor shape, so that during the scrutiny of the merger, they would appear to need a bailout from the larger Kroger.
“Paying out $4 billion before regulators can do their job and review the proposed merger will weaken Albertsons’ ability to continue business operations and compete,” Ferguson said. “Free enterprise is built on companies competing, and that competition benefits consumers. Corporations proposing a merger cannot sabotage their ability to compete while that merger is under review.”
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