Edelman Sweetens Bid for Lucky, Hints He May Take a New Tack

New York investor Asher Edelman on Tuesday sweetened his hostile takeover bid for Lucky Stores by $2 a share to $37 each for all the grocery chain’s outstanding common stock in a cash deal worth about $1.89 billion.

Lucky’s directors last week rejected as inadequate Edelman’s Sept. 24 offer of $35 a share for its 51.2 million outstanding shares in a transaction that carried a price tag of $1.79 billion.

Lucky, based in Dublin, Calif., has announced a restructuring plan under which it plans to buy back about 22% of its common shares for $40 each in a two-phase tender offer valued at $450 million. The plan would thwart Edelman’s bid.

As part of the anti-takeover maneuver, the grocery store chain also revealed earlier that it will close and sell 80 stores belonging to its Gemco discount department store subsidiary for about $450 million.

But Edelman, in a letter dated Oct. 14 to Lucky Chairman John M. Lillie, said he was “extremely disappointed with the terms of the so-called restructuring as publicly announced.” He singled out the “taxable nature of the sale of the Gemco division” and “the relatively small amount of stock to be repurchased by the company.”

Edelman, who called the Lucky plan “inadequate” because it is not aimed at maximizing shareholder value, told Lillie that he and his partners were offering to acquire the chain’s outstanding common shares for $37 each in cash.

Lucky stock gained 12 1/2 cents to close at $34.25 a share Tuesday on the New York Stock Exchange. But the stock has lost ground since Lucky unveiled its stock repurchase program last week, and Edelman pointed out in his letter that “my disappointment appears to be shared by the investment community at large.”

Consummation of the takeover would be subject to cancellation of the proposed stock repurchases and debt redemptions and to financing, which Edelman said he was “confident” can be raised.

“We believe that our proposal represents an alternative which is clearly superior to your restructuring plan and is in the best interest of all shareholders,” Edelman said in the letter.

Edelman urged the Lucky board to meet with him and his affiliates to discuss his latest proposal.

He warned the Lucky directors that if they refuse to meet with him or reject his offer, he intends to “pursue one or more other courses of action which do not involve negotiation.”

Among the range of options, Edelman mentioned a tender offer “at a price below that which we are prepared to pay in a negotiated transaction” and a proxy contest to win shareholder approval for liquidating the company.

Edelman told Lillie that he would like his response no later than Thursday.

Lucky officials said late Tuesday that its board will schedule a meeting to review Edelman’s latest proposal.