As you may have heard, Kroger, which is already the largest grocery chain in the country, wants to merge with Albertsons, creating a food behemoth that will almost certainly reduce competition and drive up food prices for anyone who shops at Kroger, Ralph’s, Albertsons, Safeway and other stores they own. But there’s another compelling reason that the Federal Trade Commission should prohibit this proposed merger, or at the very least impose strict conditions on the merger that would benefit consumers. And that’s the dividend clause in the proposed merger that would give Cerberus, the private equity firm that is Albertsons’ largest shareholder, and other investors a $4 billion windfall and saddle Albertsons with catastrophic debt. As one expert noted in this article, this “special dividend” which is slated to go into effect even before the merger is complete, is “straightforward corporate raiding.” A group of attorneys general has sued to stop this dividend from happening but it’s not clear if they will succeed.
In the meantime, the FTC should scrutinize this merger very carefully and step in to ensure that consumers are not left holding the bag as private equity companies reap billions of dollars. I have to admit I have a personal stake in this high-stakes game. I live in a condo building on Capitol Hill that used to have a Harris Teeter downstairs (Harris Teeter is owned by Kroger) but it was closed early this year and the space is still vacant 11 months later. Kroger has refused to give up the lease and now I think I understand why. The closest food market is Safeway, which is owned by Albertsons, and I’ll bet Kroger, in order to sweeten the merger deal, has agreed to keep the space vacant so as not to increase competition for one of Albertsons’ stores. Don’t you just love corporate America?
If this merger is allowed to go through, at the very least the FTC should require Kroger to give up the lease in my building to a grocery store that is not owned by either Kroger or Albertsons to ensure more competitive food prices in the area. Otherwise, the space in my building will probably remain vacant and if past history is any guide, both Kroger and Albertsons will close more stores, creating even more food deserts than we already have, particularly in lower income urban and rural areas. All because a ruthless private equity firm wants to enrich itself once again at our expense.
This blog is also posted on medium.com.
