Directors of Safeway Stores on Tuesday rejected as "inadequate and not in the best interests of the company and its stockholders" a $58-per-share takeover offer by Dart Group. But they said they are exploring "alternatives to enable stockholders to realize the full value inherent in the company."
Those alternatives, Safeway said, include a leveraged buyout, a restructuring and even a friendly merger with Dart.
On the other hand, the Oakland-based company said its board needs more time to "properly evaluate" a separate $64-per-share offer made Monday by Dart, a discount retailing and real estate concern controlled by the Haft family of Washington. Dart said that its $64-per-share offer depends on Safeway's viewing it as a friendly transaction and that the $58-per-share hostile offer launched July 9 remains in force.
The original offer is valued at $3.54 billion, while the sweetened offer is worth $3.9 billion.
Safeway--the Big Board's second most actively traded stock Tuesday with 3.2 million shares changing hands--rose $2.62 1/2 to close at $60.62 1/2.
There was no immediate comment from Dart on the Safeway announcement, which came after the market closed.
Safeway said its representatives have discussed a possible leveraged buyout with a third party, which its spokesman declined to identify. Under a leveraged buyout, a company is purchased with borrowed funds secured by the assets of the company, and the money is paid back with cash generated by corporate operations or by selling assets.
Among other alternatives, Safeway said it is studying a possible restructuring that would involve its buying up to 30% of its outstanding stock and selling off some assets, leaving Safeway as an independent company. Safeway also said it would contact Dart Group and might be interested in a friendly merger with Dart on Safeway's terms. Safeway added, however, that there is no assurance that a leveraged buyout or a restructuring will occur or that the contact with Dart will result in any agreement.
Dart said in a letter to Safeway's board last week that it is committed to buying Safeway and is willing to "negotiate any and all aspects of our offer." The letter was interpreted as an attempt by Dart to reassure shareholders that it is not interested in taking "greenmail" payments--a premium over the price it paid for its stake in the firm--to end the takeover attempt.