Any benefits American Stores Co. might receive from its acquisition of Lucky Stores of Dublin, Calif., will be a long time in coming, according to L.S. Skaggs, American's chairman.
He told the board of directors that American's net earnings probably will decline for the remainder of 1988 because of the $2.5 billion acquisition several days ago. Skaggs said American borrowed $2.5 billion and that will affect net earnings.At the annual meeting of shareholders, Skaggs said it will take some time for the benefits of the acquisition to be seen.
"The important point that I want to make is that I do expect earnings to be down for the remainder of the year and then improve in 1989. Further, I would like to emphasize we have chosen to operate the company not for short-term gain, but rather for the good of our shareholders over the long term. The reason for this acquisition was to create long-term value for our shareholders. Our past history would show our strategy has been successful."
"As John Lillie, chairman and chief executive officer of Lucky Stores Inc., has said, we expect significant synergism and savings from the combining of Alpha Beta and Lucky. However, I must point out that it takes time for these to occur. On the other hand, our interest costs started reducing earnings 12 days ago, beginning June 2, 1988, at the time we activated our bank loans."
John M. Lillie, chairman and chief executive officer, and Lawrence Del Santo, president of Lucky Stores Inc., appeared in person and in a video presentation at the meeting.
Lillie told the shareholders he was pleased to be a part of American Stores Co. family of retailing. "The new combination of Alpha Beta and Lucky Stores will produce an exciting new company. We will be by far the largest food retailer in California and Nevada, with nearly 600 stores and approximately $8 billion in sales.
"Size is an important part of our strategy, for we emphasize being a regional business with substantial related economies of scale. These economies create a low-cost structure that will continue to support Lucky's tradition of being the low-price leader in all of its markets. We will extend this program to all stores of the new subsidiary," said Lillie.
Lillie told the American shareholders that, during the initial meetings of management of the two organizations, "I've seen a complete sense of goodwill as all are swept up with enthusiasm for these opportunities."
The board also declared a quarterly cash dividend of $1.09375 per share on its Series A $4.375 cumulative convertible exchangeable preferred stock, and a quarterly cash dividend of $1.70 per share on its Series B $6.80 cumulative exchangeable preferred stock, both payable Aug. 15 to stockholders of record Aug. 1.
Board of directors of American Stores Co. has declared a quarterly cash dividend of 21 cents per share on its common stock, payable July 7 to shareholders of record June 24.
American Stores Co. announced earlier that the board of directors has established Aug. 15 as the date of redemption for the company's Series B $6.80 cumulative exchangeable preferred stock. The company will redeem all of its 1,147,194 outstanding shares at $55.60 per share plus accrued and unpaid dividend up to and including the date of redemption.
The company stated that Morgan Shareholder Services Trust Co. shall serve as redemption agent for the Series B $6.80 cumulative exchangeable preferred stock.
Shareholders of the Series B $6.80 cumulative exchangeable preferred stock should not tender their shares at this time. A notice of redemption, as well as a letter of transmittal, will be mailed after June 15 to all Series B holders setting forth the procedures for stockholders to redeem all outstanding Series B $6.80 cumulative exchangeable preferred stock of American Stores Co.
At the meeting, in excess of 89 percent of American Stores Co. outstanding shares of common stock voted. The shareholders elected each of the four management nominees as directors to its board.
Those directors are Leon G. Harmon, of Salt Lake City, retired, director and former president of First Interstate Bank of Utah; John E. Masline, of Santa Barbara, Calif., retired, former senior partner at Ernst & Whinney; L.S. Skaggs, chairman of the board; and I.J. Wagner, president of the Keystone Co. of Salt Lake City.
In another action, the company's shareholders ratified Ernst & Whinney as independent certified public accountants for fiscal year 1988.