Dart Claims Safeway to Weigh New Offer : Haft Says Management Favoring Third-Party Bidder “At Any Cost”

Directors of Safeway Stores are expected to meet today to consider a buyout offer from a third-party suitor brought in by company officials to forestall a tender offer from Dart Group, the chairman of Dart charged Thursday.

In a sharply worded letter to Safeway directors Thursday night, Dart Chairman Herbert H. Haft accused Safeway officials of engaging in “collusive action” with the third-party bidder in violation of their duty to shareholders.

“It is clear that you are favoring another bidder at any cost,” Haft wrote. “This is particularly egregious when management may have an interest in the transaction.”

A Dart official said he believes that the third-party suitor may be Kohlberg Kravis Roberts & Co., a New York investment firm and that the bid includes members of Safeway management.

Safeway spokeswoman Lissa Perlman said the Oakland-based supermarket chain could neither confirm nor deny reports of a board meeting or a third-party offer. Earlier this week, Safeway said it was talking with an unnamed third party.

Dart officials said they were told of the third-party bid Thursday by a representative from Merrill Lynch, Safeway’s financial adviser, and were told that if Dart wanted to supply Safeway with any additional information, “especially with respect to price,” it should act by this morning.

Dart launched a $3.54-billion tender offer for Safeway on July 9 and earlier this week raised its bid to $3.9 billion.

Haft’s letter goes on to complain that while Safeway has provided Dart no information or access to officials, “we understand that confidential information and access have been given to the third party over an extended period of time.”

Haft charges in the letter that the third-party suitor has imposed various conditions on its bid, including that Dart not be given the information provided to the third party and that the third-party price not be disclosed, conditions Haft said “reflect collusive action.”

Haft also warned Safeway directors against approving the bid today, saying that Dart would vigorously litigate against “any sort of lock-up arrangements, prepayments, bust-up fees, expense reimbursements or share issuances as part of any such bid.”