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Dart Group Bids $6 Billion for Dayton-Hudson

September 18, 1987|MARTHA GROVES | Times Staff Writer

Dart Group, a book and auto supply retailer controlled by two of Wall Street's shrewdest corporate raiders, Thursday offered $6 billion for Dayton-Hudson, the owner of Target and Mervyn's.

The offer for the Minneapolis-based retailer came despite tough new anti-takeover laws passed by the Minnesota Legislature at the behest of Dayton-Hudson earlier this summer.

In a letter to Dayton-Hudson's board, Herbert H. Haft, Dart chairman, and his son Robert M. Haft, president, apparently attempted to soften their images as raiders out for a quick profit.

"We want to show them that we're sincere," Robert Haft said of the bid. He estimated the cash and stock offering, which he called "full and fair," to be worth more than $65 a share.

Late Thursday, Dayton-Hudson released a terse statement saying that its board had received the unsolicited letter and would consider the bid "in due course." The retailer, which previously has indicated that it opposes a takeover, added: "No one should assume that any transaction will result."

The Hafts' letter, which had an unusually conciliatory tone, seemed designed to dispel concerns that Dart might launch a hostile bid and then attempt to dismantle the company or solicit a "greenmail" premium in exchange for selling its stock.

Offer to Donate Profits

The letter also was clearly intended to forestall criticism of the bid by management of the community-minded company, which engineered passage of the tough anti-takeover legislation after Dart Group made known its interest in buying the company.

The Hafts offered to donate to Minnesota charities "any profits we may realize from our ownership of the company's shares" should shareholders veto the acquisition. Dart also stated its intention to retain management, keep the Minneapolis headquarters and continue Dayton-Hudson's current policies regarding employees, management, suppliers, customers and the community.

"The Dart Group and our chairman, Herbert Haft, were founders of the discount field in the 1950s, and approximately 80% of the sales and assets of Dayton-Hudson are in the discount field," Robert Haft said in a telephone interview.

"We believe that we could add substantial merchandising and marketing expertise. . . . We think our skills of being good retailers and having good merchandising background would be complementary to the existing skills of the current company."

Dart, based in Landover, Md., controls Trak Auto, which operates nearly 200 discount automotive parts and accessories stores and the Crown Books chain with more than 180 bookstores. It also owns a finance corporation.

Dayton-Hudson is a major California employer in its Target and Mervyn's divisions. It also owns Midwest department stores and Lechmere, a 17-store chain of appliance, sporting goods and consumer electronics stores in New England, New York and Georgia.

In the last four quarters, the company's earnings have suffered because of poor merchandising and cost control at Mervyn's, but Dayton-Hudson recently indicated that things had started to turn around at that chain.

Dayton-Hudson Will Fight

The Dart bid caps an unsettling summer for Dayton-Hudson, which first learned of Dart's interest in June. After disclosing that interest, Kenneth A. Macke, the retailer's chairman, immediately launched a successful crusade for a special legislative session to toughen Minnesota's anti-takeover law.

A new measure was passed June 25, two days after a Cincinnati investment adviser launched a bogus $6.8-billion bid for the company that sent its stock gyrating.

Then, in July, a partnership led by Herbert Haft asked permission from the Federal Trade Commission to buy more than $15 million worth of Dayton-Hudson stock without any antitrust objections from the government. The FTC gave its approval late last month.

Stake Now 5%

Analysts said they expect Dayton-Hudson to fight a takeover, no matter how friendly it might seem.

"They said in June that they weren't interested in being acquired, and I wouldn't expect them to take a different stance now," said Glenn E. Johnson, with the Piper, Jaffray & Hopwood investment firm in Minneapolis.

Dart now owns slightly less than 5% of Dayton-Hudson's 97.4 million outstanding shares.

In recent hostile efforts to take over Safeway Co., the world's largest supermarket company, and Supermarkets General, Dart pocketed an estimated $180 million in greenmail and profits on stock sales. Both targets chose to go private in highly leveraged buyouts instead.

In trading Thursday on the New York Stock Exchange, Dayton-Hudson shares rose 50 cents to $52.875.

DAYTON-HUDSON AT A GLANCE Dayton-Hudson, with headquarters in Minneapolis, is one of the country's major department store retailers. It owns the Target and Mervyn's chains, as well as the Dayton and Hudson department stores in the Midwest. It also owns Lechmere, a consumer electronics and appliance chain. Target, a discount department store chain, is the firm's largest division with 47% of sales in 1986.

Year ended Dec. 31 1986 1985 1984 Sales (billions) $9.3 $8.3 $7.5 Net income (millions) 310 284 259

Assets $5.4 billion

Employees 139,000

Shares outstanding 97.4 million

52-week price range $38.75-$63

Tuesday close (NYSE) $52.875, up 50 cents

DAYTON-HUDSON SALES (1986 total sales of $9.3 billion,

broken down by chain)

sg,2

Target

47% ($4.3 billion)

Mervyn's

31% ($2.9 billion)

Dayton-Hudson Department Stores

17% ($1.6 billion)

Lechmere

5% ($476 million)

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