Eckerd OKs Buy-Out Offer of $1.6 Billion
Directors of Jack Eckerd Corp., a 15-state drugstore chain, agreed Thursday to a proposed $1.6-billion leveraged buy-out by employees and a group of investors.
The transaction, which is subject to the approval of stockholders, provides for an acquisition by a newly formed corporation to be owned by its employees and an investment group headed by Merrill Lynch Capital Partners.
Under the agreement, about 36 million shares of Eckerd stock would be sold to shareholders at $28 each. That, plus existing debt to be assumed in the merger, would bring the transaction’s value to about $1.6 billion, according to a statement issued by Eckerd.
On the New York Stock Exchange on Thursday, Eckerd stock closed up 25 cents a share at $29.875.
A team of about 25 management officers, headed by Stewart Turley, chairman and president, would become investors as well as direct the new company under the agreement.
The move was prompted in part by the actions of Dart Group of Landover, Md., which purchased 5% of Eckerd stock in May and June and indicated that it wanted to acquire control or merge, said Michael Zagorac, Eckerd’s vice president for public relations.
“There was quite a bit of speculation subsequent to that,” he said. “We did repurchase those shares from the Dart Group in July at market prices, but there continues to be some speculation within the market as to what may happen to our company.”
Zagorac said the board announced in August its intention to “look at options for the sale, merger or other business enterprise for the corporation,” Zagorac said.
“We did hold some discussions with selected groups, but there were no offers pursuant to those discussions,” he said.
In the company’s statement, Turley said the board decided to go with the management buy-out only after having evaluated all other options.
“The board has determined that this transaction, under which not only the company’s key managers but all employees will have a stake in the future of the company . . . is in the best interest of the shareholders, the company and the employees,” Turley said.
The trustees of the employees’ profit-sharing plan would purchase a portion of the new company, Zagorac said. That portion and management’s share have not been decided, he added.
In addition to its 1,547 drugstores, Eckerd owns the 144-unit Eckerd Optical chain in five states, three Visionworks optical stores in two states and seven Eckerd Med-Care stores in Tampa, Fla.
Under the agreement, Merrill Lynch Capital would have an additional option to purchase 6.6 million shares at $33 a share.
