Albertsons (ACI) shares were active Wednesday after a court in Washington state approved the grocer's plans to pay a $4 billion dividend ahead of its proposed $25 billion tie-up with Kroger (KR).
The Washington Supreme Court allowed for the $6.85 per share dividend payment, which state Attorney General Bob Ferguson had sought to prevent, arguing it would weaken the group's finances and ultimately lead to higher food prices if and when its takeover by Kroger is complete.
Private-equity firms Cerberus Capital Management and Apollo Global Management are set to collect a significant portion of the dividend payout, which some consumer advocates have argued is the result of 'price gouging' and inflation-busting increases on everyday items that have built market-leading profit margins for the Boise, Idaho-based grocer.
The Federal Trade Commission is reviewing the deal, which would combine the nation's two biggest grocery store chains and create a stand-alone giant with nearly 5,000 stores and annual revenues of more than $220 billion.
Kroger has pledged to invest another $1.3 billion towards upgrading Albertsons stores -- which include brands such ACME, Safeway and Vons -- as well as another $1 billion to improve benefits and wages for the group's employees in an effort to offset regulatory and consumer advocacy concerns.
"Albertsons Cos. will immediately begin the process of paying the Special Dividend and amounts will be distributed as soon as practicable to stockholders of record as of the close of business on October 24, 2022," the company said in a brief statement, adding its merger with Kroger is "continuing through required regulatory review".
Albertsons shares were marked 1% lower in afternoon trading to change hands at $21.00 each. Kroger shares, meanwhile, slipped 0.7% to $45.85 each.
The Albertsons/Kroger combination would not only create a grocery market giant, with more than $210 billion in annual sales -- topping third-ranked Costco Wholesale -- but also potentially limit consumer choice when food price inflation is running at its fastest pace in more than four decades.
Last month, Kroger posted stronger-than-expected third quarter earnings, while boosting its 2022 profit forecast for the third time this year, as the country's biggest grocery store chain retained more value-focused shoppers with lower prices and a bigger push into online sales.
Kroger said adjusted earnings for the three months ending in July came in at 88 cents per share, up 12.8% from the same period last year, on revenues of $34.2 billion.
Looking into the 2022 fiscal year, which ends in February, Kroger said it sees full year earnings in the range of $4.05 to $4.15 per share, a 10 cent improvement from its prior guidance in September.
