Lucky Stores Says Edelman Group Has Bid $1.75 Billion to Purchase Food Retailer

Lucky Stores said Wednesday that a group headed by New York investor Asher B. Edelman has offered to buy Lucky for $35 a share, or about $1.75 billion.

The supermarket company released a copy of a letter to Lucky Chairman John M. Lillie from Edelman, who said that the offer was subject to financing and that he would “welcome the opportunity” to meet with Lucky’s board to discuss the proposal.

Edelman asked for a response by Friday and added: “Preliminary discussions with investment bankers and financial institutions give us confidence that the necessary financing can be raised.”

However, Lucky’s statement said the bid would be reviewed by its board Oct. 2 during a previously scheduled meeting.

Kenneth W. Cope, Lucky’s senior vice president for administration, said he did not want to comment on whether company officials would be receptive to Edelman’s offer. But the company recently adopted a shareholder purchase rights plan, commonly called a poison pill, that would take effect if a buyer acquired 20% or more of Lucky’s shares or announced a tender offer. As a result, Lucky is viewed as likely to fight a takeover effort.

Move Expected

Edelman, who has attempted two other takeovers this year, had been expected to make a move on Lucky. On Sept. 17, Lucky’s stock rose $1.75 a share on a volume of 2.3 million shares after reports circulated that Edelman’s investment group had bought a stake in the retailer.

A spokesman for Edelman in New York would say only that the stake is less than 5%. Various reports have put it at 2% to 3% of the company’s 51 million outstanding common shares. Edelman reportedly views Lucky’s assets as seriously undervalued.

“Based on Mr. Edelman’s past investment experience, it would seem that his intention is to put the company into play,” David Jackson, an analyst with Morgan, Olmstead, Kennedy & Gardner in Los Angeles, wrote in a Sept. 18 investment report.

Edelman recently withdrew offers to take over Datapoint and Fruehauf Corp.

Likely Target

Lucky, based in Dublin, Calif., is viewed as ripe for plucking because of its weakened financial position. The company’s per-share earnings have been flat for the last eight years. Heavy competition has cut into profits at its food operations in Southern California, where it operates 175 supermarkets under the Lucky and Food Basket names.

In addition, its Gemco discount department store unit has been losing money and accounted for most of the company’s nearly $10-million earnings decline for the second quarter of this year. For the first six months, Gemco’s 80 stores, including 48 in Southern California, showed a pretax loss of $28 million.

Analyst Jackson said he expects the company’s earnings per share to be $1.40 in 1987 and $1.65 in 1988, down from $1.67 last year. He said the company estimates its “real book value” at $22.80 a share, compared to the stated book value of $12.47 a share.

In trading Wednesday on the New York Stock Exchange, which closed before the Edelman announcement was made, Lucky shares closed up $1 at $34.25 on volume of about 1 million shares.