Lucky Rejects Takeover Bid, Studies Options

Lucky Stores on Thursday rejected as inadequate a $1.74-billion takeover bid by American Stores, owner of Alpha Beta supermarkets.

In addition to turning down the $45-a-share offer, the Dublin, Calif., company also said its board viewed as inadequate an American Stores proposal to raise the bid to $50 a share, or $1.9 billion, should Lucky agree quickly to a merger.

Lucky, which runs 481 stores in California, Nevada, Arizona and Florida, also said it is considering alternatives to a takeover by American Stores, based in Salt Lake City. Among them, it said, are the sale of its operations outside California, a merger with a third party or the borrowing of funds to make a special dividend payment to stockholders.

“We are confident that pursuit of one of these alternatives will provide our best opportunity to achieve greater value for our stockholders,” Lucky Chairman John M. Lillie said in a statement.

Lucky also said that as part of an anti-takeover plan it is giving shareholders certain rights to extra stock. The idea is to make it more expensive for a would-be buyer to acquire all the shares.

There was no immediate response from American Stores Chairman L. S. (Sam) Skaggs. But analysts and investors on Wall Street applauded Lucky’s stance.

Still Could Merge

“It’s a good move by Lucky,” said Edward F. Comeau, an analyst with the Wood Gundy Ltd. investment firm in New York. “But I don’t think Sam Skaggs will fold up his tent and go home.”

John B. Kosecoff, an analyst with First Manhattan Co. in New York, also said that Lucky may not be excluding American Stores when it refers to a possible merger with a “third party.”

“They are not ruling out the possibility of a combination with American Stores,” he said, “but are simply indicating that they believe there are a variety of options available that would justify a higher price.”

A Wall Street source said: “The fact that they’re willing to look toward a sale . . . suggests that the company will be sold”--and for higher than $50 a share.

Comeau said $55 a share would be “a reasonable price” but that American Stores could afford to pay $60, given the economies of scale that Alpha Beta could realize by merging with a strong competitor.

In documents filed with the Securities and Exchange Commission late Thursday, Lucky said it has received “unsolicited indications of interest” in buying the company from third parties, which it declined to identify. It also said the board authorized management to arrange for interested parties to review confidential information.

In composite New York Stock Exchange trading, shares of Lucky rose $3.75 to $52.50.