Lucky Stores said Monday that it has tentatively agreed to sell a majority interest in its 105 troubled Eagle Food Stores in the Midwest to a privately held New York investment firm.
Judith Decker, a spokeswoman for the Dublin, Calif., food retailer, said the deal would free up cash "well in excess" of the division's $80-million book value.
Odyssey Partners, the investment firm, would become the majority owner in a new business to be formed to operate the division. Lucky would retain a "significant minority" interest, Decker said. She declined to give further details.
Lucky Chairman John M. Lillie said in a statement that the deal was reached after "an overall review of alternatives for the division following protracted efforts to obtain wage reductions."
Most Approved Rollback
Late last year, the company started negotiations with Eagle's 8,000 employees in Illinois, Iowa and Indiana in an effort to win a 7% wage rollback in exchange for a chance to share in profit.
The division, which has contributed about 20% of the company's food sales but only 8% of pretax earnings, has been hampered by the laggard agricultural economy in the Midwest and by competition with non-union warehouse stores, according to John B. Kosecoff, an analyst with the First Manhattan investment firm in New York. Eagle had $500 million in sales for the six months ended Aug. 2.
About 88% of employees ratified the proposal, and in their stores it was implemented. Nine stores rejected the plan, with unions at 25 others splitting their votes, Kosecoff said. The pay issue has been before an arbitrator since May.
However, Decker said that Odyssey intends to put its own proposal to the unions, and that the deal hinges on whether those negotiations are successful. Lucky said that current employees and union representations are expected to be retained after the deal is completed, which Decker said probably would be about Nov. 1.