The private equity company that owns Albertsons, in preparation for their contentious merger with Kroger (numerous entities are looking into the deal) is attempting to loot the company through a special dividend of $4 billion.
The most depressing thing about this is that it may not technically to be a crime:
The 2,270-store Albertsons grocery company is facing mountains of debt. It owes about $4.9 billion to worker pension funds and another $7.5 billion to creditors. Credit rating agencies say the company has a substantial risk of being unable to repay.
Yet the owners of Albertsons are trying to give themselves an extraordinary bonus.
Albertsons had planned to reward the private equity consortium that controls the company with a $4 billion “special dividend” for shareholders on Monday. To make the payment to the private equity funds and other shareholders, Albertsons is looking to expend company cash and borrow about $1.5 billion.
“They’re essentially looting this company,” said Jonathan Williams, an official with United Food and Commercial Workers Local 400, which represents Albertsons workers. “Instead of paying themselves billions of dollars, the owners should invest in the essential workers who risked their lives to keep the stores open during the pandemic.”
Washington state’s attorney general filed a lawsuit on Tuesday to block the $4 billion payment until a related merger plan with grocery rival Kroger is reviewed in full.
On Wednesday, the attorneys general for Illinois, California and D.C. filed a similar suit in federal court.
“We’re asking the court to stop this cash grab,” D.C. Attorney General Karl A. Racine said in an interview. While acknowledging that the company is required to reward investors, Racine said Albertson’s responsibilities also include treating consumers and workers fairly. He, too, described the planned payout to Albertsons shareholders as “looting.”
On Thursday night, a judge in King County, Wash., granted the state’s request to temporarily halt the payout.
I a surprised and pleased by this ruling, but this is only a temporary measure.
Albertsons is controlled by a consortium of five investment firms, the largest of which is Cerberus Capital Management, a private equity firm led by Steve Feinberg, a major Republican political donor who served on the economic advisory council for Donald Trump’s 2016 presidential campaign. Cerberus owns about 29 percent of Albertsons shares. Collectively, the consortium owns 75 percent and controls the company, according to financial statements.
The arguments over the shareholder payout come as Albertsons is planning to merge with another grocery giant, Kroger, in a $24.6 billion deal that is expected face intense antitrust review from federal regulators because it joins two of the nation’s largest grocery store chains.
And doing this as a merger is proceeding is clearly not in the putative best interest of the merged company.
It’s clear that this sort of behavior should be viewed as criminal, and, in the event of a bankruptcy, and they are setting the company for an eventually filing, that these dividends should be subject to claw back.
This is corrupt, and abusive, and parasitic.
The best solution is to frog march these folks out of their offices in handcuffs, but we are not there yet.