SAN FRANCISCO — Acting on the eve of a Safeway Stores board of directors meeting, Dart Group on Monday boosted its cash offer to acquire the world's largest supermarket chain to $64 a share from the $58 offered earlier this month.
The sweetened bid values Safeway at $3.9 billion and could thwart management's attempts to remain independent of Dart, a discount retailing and real estate concern controlled by Washington's Haft family.
"The board can't kiss this off very easily," said one securities analyst who requested anonymity. "The outside directors, in particular, will have to consider issues of personal liability," he added.
Dart pointedly addressed its new offer to Safeway's board of directors. Directors, who include the heads of such corporate giants as Apple Computer, Transamerica, Shell Oil and BankAmerica, will likely be hard-pressed to ignore the fact that Safeway's stock was trading at about $40 a share in May when the Hafts began accumulating their 5.9% stake in the company.
Safeway's stock closed Monday at $58 in New York Stock Exchange composite trading, up $1.12 1/2 a share, on volume of 1.1 million shares. Dart, which closed unchanged at $151, announced its sweetened bid after the market closed. A precipitous drop in Safeway's stock could leave directors open to lawsuits from shareholders.
Safeway, in a terse statement, said the board "will act in a manner that serves the best interests of all the company's shareholders."
Directors "will consider this latest proposal from the Dart Group, along with all other relevant information, and take appropriate action," the company added. A spokeswoman would not elaborate.
Dart said its financial adviser, Drexel Burnham Lambert, has advised the company that it is "highly confident" that it can secure financing for "a mutually agreed upon transaction." The money would be raised through the private placement of debt and equity securities.
Safeway's own financial adviser, Merrill Lynch & Co., has been working to devise plans to frustrate Dart's bid. Options reportedly being considered include the sale of some of Safeway's assets, a buyback of all or some of Safeway's shares and the placement of a large block of Safeway stock in friendly hands.
Any defensive move will be considerably complicated by Dart's 11th-hour bid.
Safeway, with a high level of debt and a faltering earnings recovery, has limited room to maneuver, analysts say. Net income for the second quarter ended June 14 fell to $45.6 million, or 75 cents a share, from $49.9 million, or 83 cents a share, a year earlier.
In addition, large blocks of Safeway shares are thought to be held by arbitrageurs, Wall Street professionals who speculate on takeover battles and who have no loyalty to Safeway's management.
Dart has said that if its offer succeeds, it will review some of Safeway's foreign operations "with a view to (their) possible disposition."
Analysts predict that Dart would also be forced to cut capital spending and close less-profitable stores to repay the debt it would incur in buying Safeway.
The takeover battle began May 15 when Dart purchased a 3-million-share block of Safeway stock and shortly thereafter signaled its intention to buy more.
Safeway filed suit against Dart and the Haft family on June 17 in an effort to block further purchases by the Hafts; that lawsuit is still pending in federal court.
Dart launched a formal cash tender offer for Safeway at $58 a share on July 9.