AGs file second request to stop Albertsons' dividend - Axios

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Illustration: Sarah Grillo/Axios

The attorneys general of Illinois, California and the District of Columbia filed a new request today in federal court to immediately stop grocery chain Albertsons from paying out a $4 billion special dividend to its shareholders.

Why it matters: This is the AGs second attempt at stopping the dividend. The same court denied a request for a temporary restraining order in early November.

Details: The AGs still want the dividend halted until a full review of Albertsons merger with Kroger is completed.

• The request includes additional evidence supporting the AGs' concern that the dividend would violate federal antitrust law as well as California, Illinois and D.C. antitrust law, according to an emailed statement.
• In particular, they claim they are able to more directly tie the dividend to the merger with Kroger rather than it being a separate consideration, noting that Albertsons contemplated a stock buyback as a better way to return capital to shareholders.

Of note: The dividend was announced along with Kroger's $24.6 billion acquisition of Albertsons.

• Albertsons declined to comment.

Our thought bubble: Some of the argument rests on pointing out that Albertsons only had $1.6 billion in "cash flows" or "net income," using the terms interchangeably, according to the court filing.

Yes, but: Net income and cash flow are quite different things in the world of finance, with EBITDA or free cash flow often determining a company's ability to service and pay down debt, not net income.

• According to Albertsons, it generated $4.6 billion in adjusted EBITDA for the 12 month period ended Sept. 10.
• The AGs did not respond to a request for comment on why they used particular financial language or metrics in filing the motion.

What they're saying: D.C. attorney general Karl Racine claims that the dividend "would effectively wipe-out Albertsons cash assets and alter its ability to conduct business-as-usual before a traditional review of the merger is complete."

• "We’re filing this motion because Albertsons and Kroger cannot illegally reduce competition and threaten District residents’ jobs and access to affordable food – but that is exactly what their proposed payout to shareholders would do," he said in an emailed statement.
• "We will not rest until we have used every tool at our disposal to stand up for workers, consumers, and families and stop this record-high payout," Racine says.
• "That is why we have filed this motion calling for a preliminary injunction in federal court to immediately stop the payout until a full review of Albertsons proposed merger with Kroger is complete," he adds.

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