U.S. state attorneys general probing Kroger deal for Albertsons

WASHINGTON (Reuters) - A half dozen state attorneys general are digging into Kroger's planned acquisition of rival grocery chain Albertsons, District of Columbia Attorney General Karl Racine said on Wednesday.

The deal, which was announced in mid-October, was hammered out to better compete with market leader Walmart Inc but was expected to run into antitrust roadblocks.

Racine, along with attorneys general from Arizona, California, Idaho, Illinois and Washington state, also urged the chief executive of Albertsons to delay $4 billion in payments to shareholders until the state merger review is done and the deal closes.

Albertsons, which owns Safeway and other grocery chains, said on Oct. 18 it would give shareholders a special dividend of up to $4 billion.

"Regulatory approval of the merger is far from assured. The states must undertake their review and assure themselves that competition in all relevant antitrust markets at issue is preserved," the state AGs wrote in the letter.

They also said that if the deal was scrapped, Albertsons would need the money "to compete with other grocery stores, a goal that its decision to enrich its shareholders to the tune of $4 billion will have made significantly more difficult to accomplish, if not unattainable altogether."

An Albertsons spokesperson said in an emailed statement that the special dividend allows the company "to return cash to all of Albertsons Companies’ shareholders," adding that it would continue to be well-capitalized after the dividend is paid.

Kroger did not immediately respond to a request for comment.

At the federal level, the deal will likely also be reviewed by the Federal Trade Commission (FTC).

U.S. Senators Elizabeth Warren and Bernie Sanders along with Representative Jan Schakowsky sent a letter to FTC Chair Lina Khan urging her to oppose the deal.

"The FTC, when evaluating the potential market and consumer effects of the Kroger-Albertsons acquisition, should closely consider both companies’ history of monopoly, labor, and consumer abuses, and whether this acquisition would exacerbate these abuses for American families," they wrote.

(Reporting by Diane Bartz; Editing by Bill Berkrot)