Group Hints It May Launch Proxy Fight for Pic ‘N’ Save
An investment group including a former T. Boone Pickens Jr. associate and an experienced Southern California retailing executive said Wednesday that it expects to launch a takeover effort for the Pic ‘N’ Save close-out retail chain.
The investment group, known as Girard Partners, disclosed in a filing with the Securities and Exchange Commission that it has acquired 6.6% of the Dominguez-based chain’s stock for $25 million.
Girard Partners is led by David H. Batchelder, who founded a La Jolla investment firm in 1988 after serving for 10 years as the chief deal maker for Pickens, the Texas corporate raider. Another key member of the group is Robert J. McNulty, president and chief executive of the HQ Office Supplies Warehouse retail chain and a founder of the Home Club chain.
Wednesday’s disclosure follows a 24% climb in the price of Pic ‘N’ Save’s stock last week on rumors of a possible takeover bid. In over-the-counter trading Wednesday, the stock was up 50 cents to close at $13.50 before Girard Partners revealed its plans to the SEC.
Analysts had been puzzled about why a takeover artist would want Pic ‘N’ Save. The company, analysts said, faces tough competition from other discounters, has little real estate and owns few, if any, other valuable assets.
But the revelation that McNulty is part of the group pursuing Pic ‘N’ Save appears to signal that the investors have an overhaul in mind for the chain, said Sarah Stack, an analyst with the investment firm Bateman Eichler, Hill Richards in Los Angeles. She called McNulty an innovative businessman who has pioneered new warehouse retailing concepts.
“There’ll be some changes made if these people are successful,” Stack said.
Stack said Girard Partners is more likely to pursue Pic ‘N’ Save with a proxy fight rather than with an outright bid for the company. She noted that the investors indicated that they still are trying to line up financing for an acquisition and that they did not disclose what price they would pay for Pic ‘N’ Save.
In the SEC filing, Girard Partners said it is seeking consent from Pic ‘N’ Save’s management to reorganize the board so that it will be dominated by the investment group. Girard proposed a five-member board, consisting of Batchelder, McNulty and supply-side economist and consultant Arthur B. Laffer, along with Pic ‘N’ Save President Lewis B. Merrifield III and the company’s former chairman, Arthur Frankel.
The SEC document said that, if installed, the new board members would seek to sell most or all of Pic ‘N’ Save to Girard Partners or another bidder. Girard Partners said it has invested in Pic ‘N’ Save because it believes that the current price of its shares “does not adequately reflect the value of the underlying businesses and assets of the company or the price that could be obtained” if it were sold.
Representatives of Girard Partners could not be reached for comment. William M. Jacobs Jr., Pic ‘N’ Save’s senior vice president and chief financial officer, said his company would have no comment until it studied the SEC filing.
Pic ‘N’ Save, a chain of 189 stores, has doubled in size during the past four years. Its earnings have declined, however, because of stepped-up competition and the cost of its expansion.
In 1989, profit fell 34% to $30.9 million on sales of $475.2 million. The stores sell a wide variety of discontinued and surplus products.
