Eileen Appelbaum on Albertsons – Kroger Merger Big Win for Private Equity – Big Loss for Workers

With regard to the Albertson – Kroger merger.  

CEPR’s Eileen Appelbaum discusses a private equity profit scheme involving the Kroger/Albertsons grocery megamerger. Albertsons will pay out about a third of its market value to its former private equity owners and investors in November as part of the merger with Kroger. The large payment sets up Albertsons for bankruptcy which Kroger can use to defend the merger. Appelbaum:

“‘Albertson’s payment’… must be stopped before this coming Monday.” 

Albertsons and Kroger Merger a Win for Private Equity and Loss for Workers,” (cepr.net), Eileen Appelbaum.

Albertsons is set to give away a third of its value to its private equity owner Cerberus and to other investors. The publicly traded supermarket chain Albertsons will pay a $4 billion special dividend in early November.

That will occur if the SEC or other regulators do not intervene in the merger.

The give-away dividend equals about a third of Albertson’s market value. Approximately seventy percent of the windfall dividend will end up with Albertson’s former private equity owners and Apollo Global Management. The Apollo has a minority share in Albertsons. The results of this give-away will be a spectacular windfall for Cerberus, enriching the PE firm and its owners, and putting the future of the Albertsons chain and store workers at risk.

While Cerberus and Apollo gains, the payment of the dividend places Albertson’s at risk of financial failure. The payout of $4 billion could bankrupt the already debt-ridden supermarket chain. To date, the general view is the FTC and the courts will not allow the merger.

And if the dividend is paid-out and causes Albertsons to fail? It provides Kroger with a “failing firm” defense for its merger proposal. Kroger could argue Albertsons will face failure if the merger does not take place.

A merger would be bad news for workers, shoppers and Albertsons. The newly formed behemoth Kroger supermarket chain could set payment to its suppliers, prices to its customers, and close stores. 

Consider increasing food prices which are already high and decreasing wages for worker to result.