Making Money From Takeover Bids : The Hafts: Retailers or Raiders?
When a subsidiary of Landover-based Dart Group Corp. was accused this year of giving unfair price discounts, company President Robert Haft shot back that he was just being a good competitor.
“This is the same fight my father fought 30 years ago,” Haft said. “They are against the consumer’s interest, against discount pricing and against being good competitors.”
Dart, which was established as a Washington-area discount drug chain in the 1950s, has made its mark as a discounter. But industry analysts say the company today is seen more as a predator than a retailing competitor.
In the three years since Robert and his father, Herbert, sold Dart’s 73 drugstores for $160 million, the company has been looking to buy and run at least one major national retail company.
But after several takeover attempts, the Hafts have not purchased a single store, although they have made millions of dollars from payments and profits on their stock holdings in companies they have attempted to take over.
Desire to Expand
In their latest overture, the Hafts announced last month that they had sought regulatory permission to acquire--”depending upon circumstances during the next 12 months”--a controlling stake in Dayton-Hudson Corp., the Minneapolis-based retailing chain.
Some analysts say the takeover attempts represent a genuine desire by the Hafts to expand their retailing operations. Others have said the Hafts simply were raiders who forced large retailers to buy back billions of dollars in stock to block unwanted takeovers--thus rewarding the Hafts and other shareholders with hefty profits.
“That is the question,” said Eliot Benson of Ferris & Co. in Washington. “But the Hafts don’t talk to anybody, so nobody knows for sure. Maybe the Hafts don’t know.”
The Hafts declined several requests for interviews from the Associated Press.
“My assumption is that they are probably in this to make themselves some more money,” said Jonathan Ziegler, a retail analyst with Sutro & Co. in San Francisco. “Their record speaks for itself. They’ve made a lot of money without purchasing a single company. . . . They make more money as losers than most make as winners.”
Last October, Herbert Haft announced that Dart had accepted $59 million in return for dropping its proposal to buy Safeway Co., the world’s largest supermarket chain.
‘Made Firm and Public Bids’
Combined with an $80-million profit on its Safeway stock holdings, Dart made $140 million on the buyout attempt, which prompted Safeway to go private in a $4.2-billion leveraged buyout.
Earlier this year, the Hafts proposed an unsolicited $1.7-billion buyout of Supermarkets General Corp. They made a $37-million profit when they withdrew their bid in May, and the company underwent a $1.8-billion leveraged buyout to thwart the takeover threat.
“The object was to acquire both companies,” said a public relations man close to the family, who asked not to be identified. “They made firm and public bids on both companies.”
In early 1985, the Hafts made an estimated $1.4-million profit on May Department Stores stock after an unsuccessful effort to buy the company. Later that year, Dart Group made an estimated $9 million on its stock in Jack Eckerd Corp. after making a takeover bid for the drugstore chain.
“They (the Hafts) don’t consider themselves greenmailers,” the spokesman said, referring to the practice of a company paying a premium to buy out a hostile bidder to thwart an unwanted takeover. “They stated clearly since selling the drugstores that they want to acquire and run a major chain.”
Earlier this summer, the Hafts sparked a flurry of action surrounding Dayton-Hudson without announcing any takeover bid. Takeover speculation peaked after Dayton-Hudson said it had been approached by Dart Group, which indicated that it had a substantial stake in the retailer and was interested in a buyout.
Dayton-Hudson, which employs 34,000 people in Minnesota, had little trouble getting the state legislature to expedite passage of a tough anti-takeover law in a one-day special session called to meet the threat.
Dart never publicly confirmed the takeover attempt, nor did it confirm that it held a stake in Dayton-Hudson until July, when it disclosed that it was seeking clearance to acquire a controlling stake.
“I don’t know that they have been the catalyst, but they certainly are players in a general macro-economic trend (of retail takeovers),” said Harry Mortner, an analyst with C. J. Lawrence in New York.
Ziegler of Sutro & Co. said some observers had argued that Dart Group’s activities had helped make U.S. retailing more productive and efficient, forcing some companies, such as Safeway, into restructurings that removed unprofitable or inefficient operations.
One industry analyst suggested that some retailers believe that the Hafts have been unable to succeed in buying another company because Herbert Haft is “too tough” in negotiations, and that secrecy about the family’s business makes it difficult to determine who is running Dart.
Family Affair
Herbert Haft, 66, established Dart in Washington in 1954. He expanded the operation as a discount drugstore chain with a reputation for irritating suppliers and competitors with its ruthless price cutting.
Robert Haft, 34, joined his father in the business after he graduated from Harvard Business School in 1977. Dart later launched Crown Books Corp., which began irking competitors by selling books at 15% to 35% off the suggested retail price.
In 1979, the Hafts took the strategy to Trak Auto Inc., an auto parts chain that discounted parts by up to 51% off suggested retail price.
Herbert Haft is listed as chairman of Dart and of Trak. Robert is president of Dart, Trak and Crown, all of which employ more than 3,700 people.
Gloria Haft, Herbert’s wife, is listed as a vice president and director of Dart. A daughter, Linda, is listed as a vice president.
The family, which lives in Washington, owns all of Dart’s voting stock.
