Colorado is leading a multistate investigation into the Kroger-Albertsons merger and has joined the opposition to the proposed $4 billion dividend for Albertsons shareholders.
“If the special dividend is allowed to be paid out to investors, it would lessen Albertsons’ ability to compete not only during the pendency of the merger review, but also in the event that the merger is blocked and Albertsons has to continue on its own,” said Phil Weiser, Colorado’s attorney general, in a statement.
The statement also said his office has “deep concerns” that the proposed merger could result in higher prices, lower wages, and fewer jobs, and could have a negative impact on farmers and other local suppliers in the state.
Late Friday, a judge ruled that Albertsons should be allowed to pay the dividend, but Washington Attorney General Bob Ferguson immediately appealed the decision to the Washington Supreme Court. The attorneys general of Washington, D.C., California and Illinois have also filed suit in federal court to block the dividend payment, which was announced in conjunction with the proposed Kroger-Albertsons merger.
In an amicus brief filed in support the state of Washington’s suit against Albertsons to block the dividend payment, Weiser cited the particular concerns that Colorado has about the merger. Kroger operates 148 stores in the state under the King Soopers and City Market banners, and Albertsons operates 105 Albertsons and Safeway stores, according to the filing.
“There are numerous markets throughout Colorado where Kroger and Albertsons compete head-to-head for the same supermarket customers, including some in which customers have few, if any, alternatives to these two companies to meet their supermarket needs,” Weiser wrote in the filing.
A union member from Colorado raised similar concerns during a recent United Food and Commercial Workers press conference expressing opposition to the merger.
Andres Becerril, a front-end supervisor at a King Soopers store in Denver and a member of UFCW Local 7, said that in many communities a combined Kroger-Albertsons and Walmart together would dominate the market.
In Durango, Colo., for example, which has two City Markets and an Albertsons, in addition to a Walmart supercenter, the two companies would control 90% of the grocery share, he said.
“In small communities across Colorado and Wyoming … there will be no competition,” he said. “Instead, these small towns would be left with fewer jobs and higher food prices, thanks to the duopoly.”
He also agreed that the merger could have a negative impact on suppliers in the region, including farmers and ranchers.
Kroger has argued that the merger could benefit suppliers by offering more stability and other benefits.
Weiser in the Amicus brief detailed the negative fallout from the 2015 Albertsons-Safeway merger, in which Haggen acquired 146 stores to satisfy antirust regulators, then was unable to operate them successfully and filed for bankruptcy. Many of those divested stores were either re-acquired by Albertsons or closed.
“Albertsons should face the highest degree of skepticism to ensure that it is not once again allowed to creatively skirt government merger enforcement authority,” Weiser said in the filing.
Weiser also said he will hold public community forums across the state in the new year to gather feedback about the proposed merger.
As previously reported, Kroger and Albertsons have agreed to combine in $24.6 billion deal that is expected to close in early 2024. The merger is expected to garner close scrutiny from federal regulators and has already been the subject of one Senate subcommittee hearing.
The two companies have proposed forming a separate company to operate stores that would be spun off to satisfy antitrust concerns and have pledged that no stores would be closed as a result of the transaction.
However, some observers have been skeptical about the potential viability of a spun-off company, which could have far-flung assets in several markets and would continue to compete against a stronger Kroger-Albertsons combination.