American Stores Co. officially launched its "friendly" $45 per share offer to acquire Lucky Stores Inc. this week, but the Dublin, Calif.-based chain of supermarkets is advising its shareholders to hold tight.
A spokesman for Lucky said the company is reviewing with its financial and legal advisers the $1.72 billion cash tender offer that American Stores announced last Monday and will analyze American's offering materials this week.In the meantime, Lucky Stores said it "strongly advises" its stockholders not to take any action on the Salt Lake-based American Stores offer until Lucky's board of directors "fully considers" the offer and makes its recommendations.
Lucky set no deadline for those recommendations. Company management is reportedly considering options to the American bid, including a management-led leveraged buyout, or a defensive acquisition of another chain.
A spokeswoman for Lucky Stores wouldn't say if the company considers American's bid to be hostile, but American Stores spokesman J. Michael Holt said he believes the takeover is being viewed as "friendly."
Two years ago, Lucky fended off a hostile takeover attempt by New York investor Asher Edelman by selling off such assets as its 80-store Gemco drug chain and its 105-store Eagle Foods division in the Midwest.
Lucky now has in its bylaws a provision a so-called "poison pill" that limits the voting power of stockholders holding more than 10 percent of the company's shares. That expires in December.
The impending takeover offer was revealed in a letter last week to Lucky Stores Chairman John M. Lillie from American Stores Chairman L.S. Skaggs in which Skaggs said his company has a very high regard for Lucky Stores Inc., its management and business operations.
Saying the merger would be in the best interest of shareholders, employees and customers of both companies, Skaggs told Lillie that if the merger goes through, Lucky Stores and American's Alpha Beta stores would be combined "under the Lucky name, utilizing Lucky's business philosophy, including (Lucky's low) pricing and marketing strategies."
Skaggs said he wants Lucky's management to stay on and operate the combined company if the acquisition goes through.
In a statement issued this week, American Stores said the offer is conditioned upon, among other things, American Stores acquiring at least a majority of Lucky's 38.6 million shares, including those shares American Stores already owns.
American Stores said Morgan Guaranty Trust Co. of New York has committed to provide $500 million to meet the offer and that American is "highly confident," based on current market conditions, that it will be able to get commitments from other banks for the rest of the $1.72 billion.
American Stores Co. said it intends, as soon as possible following the completion of the tender offer, to complete a merger in which shareholders who did not tender their shares will receive the same cash price paid in the offer.
American Stores said the offer and withdrawal rights will expire at 10 p.m. April 22 MDT (midnight in New York) unless extended. The tender offer, filed Monday with the Securities and Exchange Commission, will be mailed "promptly" to Lucky Stores shareholders.
Lucky employs 39,000 workers at 481 stores in California, Arizona, Nevada and Florida. American owns about 1,600 retail grocery and drug stores in 39 states. Its subsidiaries are Acme Markets, Alpha Beta Grocery Stores, Jewel Food Stores, Osco Drugs, Osco-Savon Drugs, and Skaggs-Alpha Beta Grocery Stores.
Last year, American earned $154.3 million on $14.3 billion in revenues, up from $14 billion in revenues in 1986 and $144.5 million in earnings. Lucky's earnings fell 33 percent in the year ending Jan. 31 to $151.7 million or $3.93 per share, down from $225.9 million or $4.47 per share in fiscal 1986. Revenues climbed to $6.9 billion, up 8 percent from $6.4 billion in 1986.