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Reuters reports that a US federal court judge has refused to temporarily block a $4 billion dividend payment to its shareholders in advance of the company's proposed acquisition by Kroger.

According to the story, "The federal court in Washington D.C. denied issuing a restraining order in the case, which was filed by the attorneys general of California, Illinois and Washington D.C and sought to block the payout until antitrust reviews of the proposed merger were completed."

However, Albertsons still faces an obstacle in Washington State, where a state court "barred Albertsons from paying the special dividend until Nov. 10, saying that it would weaken its ability to compete as the antitrust reviews go on.

"'"By eliminating its cash-on-hand and nearly doubling its debt, Albertsons will be in a weakened competitive position relative to Kroger, thereby harming grocery consumers and workers throughout Washington,' State Court Commissioner Henry Judson wrote in issuing that temporary restraining order."

In a statement issued yesterday, Albertsons said that it "continues to seek to overturn the existing temporary restraining order granted by the Washington State Court on November 3, which was based on the incorrect assertion that payment of the Special Dividend would impair the Company’s ability to compete while its proposed merger (the “Merger”) with The Kroger Co. (“Kroger”) is under antitrust review. This order, which restrains the Company from paying the Special Dividend, remains in effect until November 10, 2022, unless within that time, an order is entered extending or dismissing the temporary restraining order.

"Albertsons Cos. continues to maintain that the lawsuit brought by the State of Washington is meritless and provides no legal basis for canceling or postponing a dividend that has been duly and unanimously approved by Albertsons Cos.’ fully informed Board of Directors. After payment of the Special Dividend, Albertsons Cos. will have approximately $3.0 billion of liquidity, including approximately $500 million in cash and approximately $2.5 billion available under its already existing asset-based lending facility, and expects to continue to generate strong revenues and positive free cash flow, further increasing liquidity. Albertsons Cos. is confident that it will continue to make strategic progress following the payment of the Special Dividend, given its strong cash flows and low debt profile.

"The Company remains fully committed to investing in the associates, stores, and digital capabilities that have made its recent growth and strong performance possible."

KC's View:

Even if the courts allow the dividend payment, Reuters notes, there still is considerable resistance to the deal:  "Last week, 26 organizations, including the retailers' biggest unions and antitrust experts called on the FTC to block the merger, saying it would exacerbate inequality through job losses and eroding wages at a time of high inflation."

Let's assume, just for the sake of argument, that the dividend payment is allowed.  And then, assume the merger process continues, with all sorts of regulatory and legislative examination of the rationales behind it.

I wonder if at any point during the process it will be argued that one of the reasons Albertsons has to be acquired by Kroger is that it simply is not competitive - against Walmart and Amazon - on its own.  Will it be pointed out that at this point in the process, Albertsons was arguing that it could continue to be competitive even by paying the $4 billion dividend?

There is a lot of arguing and debating still to take place about this deal.  I'm not sure how I feel about it, to be honest, but I do think it is important to keep track of both the questions and answers going forward.