After an eight-week battle, Salt Lake-based American Stores Co. emerged victorious Friday in its bid to acquire Lucky Stores Inc., which operates a chain of 480 supermarkets, mostly in California.
American and Lucky jointly said they have entered into an agreement for American to buy all 37.5 million shares of Lucky's stock at $65 per share in cash, a $2.47 billion buyout that, if completed, will make American Stores - currently the third largest - the nation's largest supermarket and drug store operator with nearly 2,000 units."We are extremely pleased that an agreement has been reached," American Stores Chairman L.S. Skaggs said. "American Stores has always considered Lucky to be the leading supermarket chain in California and is enthusiastic about the combination of our Alpha Beta operations with those of Lucky.
"We believe that the merger will be beneficial to California consumers. It will produce a stronger company with greater potential for growth and job creation due to the combined strengths of Lucky and Alpha Beta."
Lucky Stores Chairman John M. Lillie was equally upbeat. "Lucky, with the combination of Alpha Beta, will become the largest supermarket chain in California with nearly $8 billion in sales and more than 550 stores," said Lillie. "This will give us an extraordinary base to provide California consumers with steadily improving values and services."
Lucky, based in Dublin, Calif., is the nation's sixth-largest supermarket chain and operates as a low-cost leader.
American initially bid $45 per share - $1.74 billion - when it launched its takeover of Lucky in late March. When that bid was rejected by Lucky's board, American said it might consider raising the offer to $50 if Lucky agreed to a "friendly" merger.
But Lucky did not agree. Instead, it went looking for other suitors and found one in New York investment banker Gibbons, Green, Van Amerongen, which offered to acquire Lucky for $61 a share.
That move was then countered by American's $65-per-share bid - a $2.47 billion total - which was accepted Friday.
Lucky said its directors unanimously approved the agreement and recommended its shareholders accept American's tender offer, which is conditional, among other things, on at least a majority of Lucky's outstanding shares being tendered.
Under the agreement, if the tender offer is completed, any Lucky shares not purchased by American will be converted into the right to receive $65 in cash.
In light of the new agreement, Lucky Stores said its directors have terminated the April 28 merger agreement with Gibbons, Green, Van Amerongen and will pay the firm a $20 million fee for breaking the contract.
American Stores said that it has received written commitments from commercial banks for all financing required. The offer and withdrawal rights expire at 12 midnight, EDT, on June 1, unless extended.
The two companies said they have agreed to dismiss all litigation relating to the acquisition of Lucky. The companies said materials describing the agreement between Lucky and American Stores will be mailed "shortly" to Lucky's stockholders.
Lucky's shares closed unchanged Friday at $64.375.
The merger will give Salt Lake City-based American Stores annual sales of about $21.1 billion, analysts said, pushing it past Kroger Co. and Safeway Stores Inc.
In a filing with the Securities and Exchange Commission, American Stores said it agreed to sell Lucky's Arizona grocery and mercantile operations within six months after a successful takeover of the company.