Kohlberg Kravis to Acquire Stop & Shop
Stop & Shop Cos. announced Monday that it has agreed to be acquired in a $1.23-billion leveraged buyout by the investment firm Kohlberg Kravis Roberts & Co., but Dart Group Corp. said the news will not deter its attempt to gain control of the retailer.
Stop & Shop said a Kohlberg Kravis subsidiary, SSC Holdings Corp., will purchase at least 66% of the 28 million outstanding Stop & Shop shares at $44 each.
If all outstanding shares were purchased, the leveraged buyout would total $1.23 billion. In a leveraged buyout, investors borrow heavily to buy out a company and then pay off the debt with the target company’s cash flow or the sale of its assets.
Dart, which launched the hostile takeover bid in January, extended until March 9 an offer of $37 a share for all outstanding Stop & Shop stock and indicated that it planned to go ahead with a proxy fight to replace Stop & Shop directors later this month.
Dart spokesman Jeffrey Gast said the Landover, Md.-based firm planned to continue the cash tender offer past March 9 on a day-to-day basis.
However, Harry Wells, an analyst at Adams, Harkness & Hill in Boston, said it was unlikely Dart could match the $44-a-share offer.
“I think it’s over,” Wells said. “You’ve got to be able to support the debt with some level of safety . . . and ($44) is about as much as one can reasonably afford to pay (for Stop & Shop).”
Stop & Shop has rejected as inadequate Dart’s $1.03-billion offer and filed suit in federal court seeking to block Dart.
A countersuit filed by Dart claiming that Stop & Shop illegally withheld corporate information was rejected last week by U.S. District Court Judge Rya Zobel, who ordered that the suit must be filed in state courts.
Dart, which purchased nearly 730,000 shares through its Jefferson Acquisition Corp. subsidiary, announced Feb. 26 that it received approval from at least 10% of Stop & Shop shareholders to call a special shareholders meeting on March 30.
At the meeting, Dart wants to remove the Stop & Shop board and replace it with Jefferson nominees.
Under the deal with Kohlberg Kravis, Stop & Shop said it will retain its present management and remain based in Braintree, Mass.
