Kroger Plans $3.77-Billion Restructuring
Kroger Co. said Tuesday that it is considering a $3.77-billion restructuring plan but added that the proposal was not specifically designed to ward off a possible hostile takeover bid by Herbert and Robert Haft.
Kroger, one of the nation’s largest grocery chains, said it is asking its directors to approve a plan that would plunge the company into debt but keep it publicly owned. Kroger has 1,300 supermarkets and other operations in 29 states.
The announcement sent Kroger stock soaring $11.75 a share to $51.25 in nationwide trading of issues on the New York Stock Exchange.
A Federal Trade Commission ruling Friday allowed the Hafts to acquire at least $15 million worth of Kroger stock. The Hafts, who control Dart Group Corp. of Landover, Md., are corporate takeover strategists and have unsuccessfully chased other supermarket chains but made huge profits in the process.
“This restructuring is not specifically tailored to the Haft situation,” Kroger spokesman Paul Bernish said. “We take it seriously. But ever since the market became competitive in 1985 or 1986, we’ve been pretty vigilant about this. We want to keep Kroger an independent and public company.”
Kroger said the restructuring would involve substantial but unspecified bank loans, paying shareholders $48 in cash and securities per share, and allowing them to keep their stock. Kroger has about 78.57 million shares outstanding.
Kroger said it will repay the loans using cash flow from operations, reducing expenses and selling assets. In a 1986 restructuring, Kroger sold its chain of SupeRx retail drugstores, and Kroger has worked since July to sell off its unprofitable chain of Florida Choice supermarkets and liquor stores in Florida.
“This is a case of extending that process,” Bernish said. “Our review of assets will be heightened if this plan is approved.”
The FTC ruling was the first official sign of the Hafts’ interest in Kroger. Representatives of the Hafts declined to comment.
Supermarket industry analysts saw the restructuring plan as a positive step for Kroger.
“This has been an option for Kroger for a long time. It is not necessarily a response to the Haft announcement, but the Haft family move was a catalyst,” said Elizabeth Shiels of the investment firm Hilliard Lyons in Louisville, Ky.
“Kroger has been looking for ways to reward its stockholders,” she said. “This restructuring allows the company to stay public. . . . This is a prudent move for Kroger.”
If the Hafts were to take over Kroger, “it’s almost certain that they’ll start dismantling the company and selling off its assets,” said Gary M. Giblen, vice president at Rotan-Mosle, a Houston-based investment firm.
