Never-say-die investor Asher B. Edelman, apparently in a bid to force Lucky Stores' hand on the eve of a key board meeting, bought half a million shares of the retailer's stock on the open market Wednesday, Wall Street sources said.
The stock, bought at $33.50 a share late in the day on the Pacific Stock Exchange, would appear to boost Edelman's stake in the Dublin, Calif., company to just under 5%. His holdings had been estimated previously at more than 3% of the 51.6 million common shares outstanding.
"He could be doing one of two things," said John Kosecoff, an analyst with First Manhattan in New York. "Either he's looking to raise the price of the stock so that he can liquidate his entire holdings at a higher price or he's taking the route that Campeau used with Allied Stores."
In a controversial ploy that bypassed a formal tender offer, Campeau Corp., a Toronto-based real estate developer, bought about 48% of Allied on the open market. The technique, known in the merger and acquisition lexicon as "street sweeping," forced Allied to succumb to a takeover.
Analysts said Edelman's purchase Wednesday might have been designed to apply pressure on Lucky's board to show how its ongoing restructuring will realize enough value to justify the board's rejection of Edelman's $37-a-share bid. Edelman formally withdrew the bid last week but indicated that he might still be interested in buying the company.
Lucky, which has already taken drastic measures to fend off Edelman since he first made a play for the company in late September, is expected to announce further details of its restructuring after the board meeting today. In an interview on Monday, Lucky Chairman John M. Lillie said the fate of Lucky's specialty stores is one issue to be decided.
Judith Decker, a company spokeswoman, said Wednesday that the company had no comment on reports of Edelman's most recent purchase.
As part of Lucky's restructuring, the company a month ago announced plans to close and sell its 80 Gemco membership discount department stores. The company, which operates primarily food stores, is expecting to garner $450 million in after-tax proceeds from the sale of 54 Gemco locations to the Target division of Dayton Hudson.
In addition, it has said it might buy back between 22% and 40% of its stock at $40 a share to bolster the value and make a takeover more expensive for Edelman.
Edelman's latest purchase of 500,000 shares indicated to some analysts that he wants a firmer stake in Lucky to give himself more leverage.
"If he thinks something can be realized through a share buyback, he has to have enough shares that he can get a spread so that if he sells back his shares he'll be able to cover his legal expenses, costs of transaction and so on," Kosecoff said.
Assuming that Edelman still holds the initial 3%-or-so stake that he bought at an estimated average price of $28 per share, he would stand to make a profit of perhaps more than $21 million on those shares alone by selling them to the company at $40 a share. His gain on the 500,000-share block would boost that profit by an additional $3.25 million.
In trading Wednesday on the New York Stock Exchange, Lucky's shares closed at $33.50, down 25 cents, on volume of 2.16 million shares.