Lucky Holders, Wary of Restructuring Plan, OK Reincorporation
Lucky Stores shareholders, many voicing strong concerns that they will suffer financially from the company’s massive restructuring, voted narrowly Monday to approve a key element of the plan--Lucky’s reincorporation in Delaware.
The partly completed restructuring--which includes the repurchase of 27% of the company’s shares and the sale or spinoff of all of its non-food businesses--was implemented to thwart a $1.88-billion takeover by New York investor Asher B. Edelman.
That persistent suitor, who controls about 6% of the Dublin, Calif., company, failed in a last-ditch effort at a 7 a.m. federal court hearing Monday in San Francisco to block the reincorporation.
58% Vote for Plan
Reached Monday afternoon at his vacation home in Sun Valley, Ida., where he headed after the hearing, Edelman said he plans to “pursue our lawsuit and all other possible actions vigorously.” He added that he was encouraged that only 58% of Lucky shareholders voted in favor of the reincorporation.
Edelman, whose quest for the company began in late September, may not have made the foggy, soggy trip east across San Francisco Bay to attend the meeting, but many who supported his proposal did, and they sharply criticized management for not letting shareholders vote on Edelman’s $37-a-share bid.
In opening remarks to about 250 shareholders, Lucky Chairman John M. Lillie anticipated concerns about valuation. “Your board envisions returning immediate value through the $575-million share repurchase and distribution of Hancock (Textile) shares and building long-term value by focusing Lucky on the business and markets that we know best--food retailing,” he said.
Lillie looked alternately perturbed and amused as he fielded shareholders’ questions and comments.
Howard Johnson, a longtime shareholder, told Lillie: “Only when Asher Edelman stood up and was willing to be counted did the stock move up.” He drew scattered applause when he added: “I’m in favor of Asher Edelman taking over this company.”
“Management is doing this to protect management,” said Fred Fastenau of San Carlos, who voted 273 shares against the reincorporation. “From what I see, they’re not particularly for the individual shareholder.
“I’d like to know why they think (the restructuring) will make the company worth more than $37 a share.” Lucky shares closed Monday at $30.50, up 12.5 cents, in the range that the stock price has languished in recent weeks.
Lucky sought the reincorporation to avoid California restrictions on shareholder distributions that the company said would inhibit the restructuring. However, shareholders expressed concerns that reincorporation would entrench Lucky management by granting more power to the board.
One aspect of the restructuring plan is the spinoff of Hancock Textile, a highly profitable retail fabric operation, to shareholders next year.
Other elements are the sale of the Gemco membership discount department store locations and the company’s auto parts division, both of which the company said it expects to complete today. The company also is negotiating the sale of its Yellow Front general-merchandise stores.
One shareholder, however, was smiling ear to ear when the meeting adjourned. Six-year-old Michelle Bayol of Foster City, holder of 18 shares given to her by an uncle, nodded enthusiastically when asked whether she was pleased with the vote. She was accompanied by her father, Lou, who said: “She likes going to Lucky stores with her mom, and therefore she’s in favor.”
