Lucky's Stock Rises on Reports That It Is Buyout Target

Times Staff Writer

Lucky Stores Inc. on Wednesday entered the retailing sweepstakes on Wall Street as it became the second major California supermarket chain since June to emerge as a target of a possible takeover.

The stock price of the Dublin, Calif., company, which operates Lucky and Food Basket supermarkets in California as well as Gemco discount department stores, rose $1.75 in heavy trading on the New York Stock Exchange amid reports that New York investor Asher B. Edelman had acquired 1.5 million shares, or a 2% stake, in Lucky.

Edelman, reached at his Manhattan office, said he had no comment on the report, which first surfaced in a syndicated column by Dan Dorfman. "I never comment on what I own or don't own," said Edelman who also is chairman of San Antonio-based Datapoint Corp. He recently withdrew his offers to take over both Datapoint and Fruehauf Corp. of Detroit.

Kenneth W. Cope, Lucky's vice president of corporate affairs, also declined comment, saying that "we'll make a comment when it is appropriate."

Lucky's stock had been rising over the last several days amid speculation that it would be a takeover target. It was the third most active stock on the New York Stock Exchange on Wednesday with a volume of 2.3 million, closing at $30.50 share, up $1.75. Lucky closed last Thursday at $24.25.

'Poison Pill' Defense

Less than a month ago, Lucky adopted a shareholder purchase-rights plan, commonly known as a "poison pill," which would become effective if a buyer acquires 20% or more of Lucky's shares or announces a tender offer.

In recent months, investors have begun to re-examine the value of many supermarket operators, analysts say, since the recent leveraged buyout of Safeway Stores. This summer, Dart Group attempted to purchase Safeway, the nation's biggest supermarket chain, but was outbid by the New York investment firm of Kohlberg Kravis Roberts & Co. It is paying $4.2 billion--the most ever paid for a retailing company.

Like Safeway, Lucky has sizable real estate holdings. Lucky's 1985 annual report valued its real estate at about $300 million, but the actual market value is thought to be to be far greater. In addition, analysts say Lucky would be more profitable if it spun off its Gemco unit, which has been a money loser recently. Lucky's overall performance also has been dampened by its food operations in Southern California, where heavy competition has cut into profits, analysts say. Lucky operates 175 markets in Southern California under the names of Lucky and Food Basket.

In the second quarter ended Aug. 3, Lucky's earnings fell to $15.6 million from $25.2 million in the same period a year ago. Gemco alone lost $16.46 million, compared to earnings of $5.21 million. Lucky's overall sales for the latest quarter totaled $2.32 billion, up from $2.31 billion a year earlier.

Third Takeover in Year

Edelman, if he attempts to buy out Lucky, would be embarking on his third major takeover in less than a year.

Earlier this year, he became chairman of Datapoint shortly after acquiring more than 10% of the computer company's stock. He had proposed a leveraged buyout at $6 share, or $416 million, but withdrew the offer in May, noting that Datapoint performance had improved and the bid was thus underpriced and unfair to other stockholders.

At about the same time, Edelman set out to acquire Fruehauf, a manufacturer of truck trailers. He was eventually outbid by a Fruehauf management group and Merrill Lynch & Co.

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