WILMINGTON, Delaware — Albertsons’ payment of a controversial dividend to investors shortly after it agreed to merge with Kroger never put the grocer’s financial health at risk, Albertsons’ former chief executive testified Monday during a trial over which company is to blame for the deal’s collapse.
By contrast, Albertsons had plenty of cash on its balance sheet as it pressed forward with plans to distribute the $4 billion special dividend and remained in solid fiscal health after providing the money to stakeholders, Vivek Sankaran said in his testimony on the first day of the trial in the Delaware Court of Chancery.
Albertsons began distributing the funds in January 2023 after prevailing in a legal fight with attorneys general of Washington state, California, Illinois and Washington, D.C., who had sued to stop the payment on the grounds that giving out the funds would weaken Albertsons’ ability to compete. The opposition led a judge to temporarily halt the payment, which Albertsons had intended to make in early November 2022.
Under cross-examination on Monday, Sankaran was confronted by an attorney for Kroger with evidence that Albertsons and Kroger faced opposition on a variety of fronts to the special dividend, which the companies announced in their merger agreement and described as a “pre-closing dividend.”
That opposition included an October 2022 letter from the Federal Trade Commission to attorneys representing Albertsons and Kroger that the attorney presented. The letter indicated that the agency was looking into the timing of the dividend payment and noting that the dividend might impact its review of the transaction.
Kroger’s attorney also brought up a letter that labor leaders in Southern California sent in December 2022 in which they objected to the dividend and requested that Albertsons hold off on paying it.
Federal lawmakers, including Sens. Elizabeth Warren and Bernie Sanders and Rep. Jan Schakowsky, also questioned the dividend, Kroger’s attorney said. The lawmakers said in an Oct. 25, 2022, letter to then-FTC Chair Lina Khan that the agency should oppose the merger in part because of the “unusual circumstances” of the dividend.
Sankaran emphasized in his testimony that Albertsons and Kroger worked together to gain clearance to distribute the dividend. He also said that he concluded that if Albertsons had decided not to proceed with the payment, the company could have faced legal problems.
In February 2024, the FTC and nine attorneys’ general filed a federal lawsuit that sought to stop Albertsons from merging with Kroger on grounds that it would be anticompetitive. A federal judge in Oregon and a state judge in Washington both blocked the merger on Dec. 10, 2024. Albertsons terminated the merger the following day and filed suit against Kroger, accusing its would-be partner of mishandling the merger-review process.
