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The Smash and Grab of Kroger-Albertsons
by ButterflyEffect

    There’s been a lot of good analysis of this deal already, so I want to focus on something a little unusual. The merging parties and their investors know that enforcers will challenge the deal. I mean, Albertsons will get $600 million from Kroger if the government blocks the deal, which is a reasonably sized break-up fee. This merger is no slam dunk, to put it mildly.

    What I find weird is that, in just a few weeks, and long before any merger trial, Albertsons will hand up to $4 billion to its private equity investors Apollo Capital and Cerberus Capital Management, in a special dividend. That’s the cash and working capital necessary to keep a supermarket chain functional, gone, to the private equity investors, even if the merger falls through. And that’s worrisome.