Lucky Stores indicated Thursday that it will continue plans to restructure the company, even though New York investor Asher B. Edelman has dropped his $1.89-billion takeover bid.
According to sources familiar with Lucky's plans, the company believes that it can obtain about $600 million from the sale of its three specialty chains and use that money to repurchase additional Lucky shares. Those chains are Hancock Fabric stores, Yellow Front general stores and automotive stores that operate under the Kragen and Checker names.
Lucky previously announced a broad restructuring that includes more emphasis on its supermarket business, the repurchase of shares and the sale of its other businesses to discourage Edelman, who offered to buy the Dublin, Calif. company for $37 a share. Lucky's 80-store Gemco discount chain is being closed and 54 of the stores are being sold as part of Lucky's restructuring program.
Edelman said on Wednesday that he was withdrawing his bid for Lucky because he believes the company is now worth less as a result of Lucky's reorganization plans. He said, however, that he remains interested in acquiring the company.
Lucky Chairman John M. Lillie responded in a statement on Thursday, saying he was "pleased that Mr. Edelman has dropped his proposal, which was previously rejected by Lucky Stores' board."
The company's board of directors will meet next Thursday to review proposals to either sell or spin off to shareholders the three specialty-store chains, the company said in a statement. The specialty stores earned $54.8 million before taxes, or one third of Lucky's pretax earnings, on sales of $728.9 million in 1985.
If stores are sold, Lucky said it may use the proceeds of the sale to repurchase up to 40% of its stock at $40 a share, according to knowledgeable sources. The company said previously that it will use the $450 million it expects to realize from the sale of Gemco stores to repurchase 22% of its shares at $40 a share.
Judith Decker, a Lucky spokeswoman, said that the additional stock purchases would be contingent on a decision to sell the specialty stores, although she added, "I don't know what our board will do."
Edelman said previously that he advocated spinning off the stores to shareholders in a tax-free transaction during a meeting on Tuesday with Lillie and Lucky's investment advisers from Goldman, Sachs. Edelman said the Lucky negotiators weren't receptive.