L.S. "Sam" Skaggs, retired chairman of Salt Lake-based American Stores, might be selling his 18.3 percent interest in the company, valued at $1 billion.
The 72-year-old Skaggs, who has never been accessible to news media, apparently told the U.S. Securities and Exchange Commission that he and his wife, Aline, are considering selling their stock. The SEC filing indicates the sale might be part of a management shakeup or the liquidation of American Stores assets.The SEC filing last week said Skaggs was considering selling his 26.4 million shares and that he was exploring other options, including a change in the company's management or holdings. As the single largest stockholder in the company, Skaggs would need to attract 32 percent to attain majority control, according to an article in the Wall Street Journal.
In a statement released Tuesday, the company said its board of directors has amended the company's shareholder rights plan to reduce the ownership threshold at which the rights are triggered from 20 percent to 10 percent.
"Under the amended plan, if any person or group acquires beneficial ownership of 10 percent or more of the company's common stock, each holder of a right (other than the acquiring person) will have the right to buy $125 of the company's common stock for $62.50," the statement said.
"The amended plan provides that the rights are not triggered as a result of the current stock ownership of Mr. L.S. Skaggs, his wife and related trusts and foundations or with respect to additional purchases of up to 1 percent of the company's share by such entities," the statement said.
Joele Frank of Abernathy MacGregor Scanlon, New York City, said the above statement is considered a "poison pill," meaning the amendment makes any ac-quisiition of the company prohibitively expensive by anyone the board doesn't like.
She said it is designed to protect the rights of all shareholders and allows Skaggs to purchase up to 1 percent more of the stock.
Even though the company is faced with the massive stock sell-off, the board of directors have vowed to keep the company independent according to a statement released several days ago by the company, said Judith A. Barker, American Stores vice president of public and investor relations.
Victor L. Lund, chairman and chief executive officer, said in a prepared release the company's future lies in its current strategy for increasing shareholder value.
If a management battle emerges it could be over Skaggs' old strategy of letting the various units of the company run themselves as opposed to the present strategy of centralized control.
According to the Journal, if a fight ensued between Skaggs and Lund, analysts would side with Lund. "For the first time they are getting their act together," said Edward F. Comeau of Donaldson Lufkin and Jenrette. "There's too much at stake to allow (Mr. Skaggs) to dabble in it again," he said.
Andrew Wolf with Merrill Lynch & Co. said he didn't see any advantage of breaking up the company. "The long-term value really rests with management's program, which seem to be bearing fruit," he said.
The Journal article said another reason Wolf didn't see any advantage in a breakup is that American Stores is no longer the Wall Street bargain it used to be. While its stock traded at $26 a share in January, it closed last week at $39.75, up $1.125.
Skaggs left active management in the company in 1988 and retired the chairmanship last year although he still collects $750,000 annually as a consultant. In 1995, the company reported revenue of $18.3 billion and net income of $316.8 million.
Leonard S. Skaggs was L.S. Skaggs' father and one of six sons of Safeway founder Marioni Skaggs. Leonard bought Pay Less Drug Stores in Salt Lake City in 1939 with the money he made from his Safeway stock.
L.S. Skaggs took over after his father died in 1950. In 1965 after the business had acquired 69 locations, it incorporated as Skaggs Drug Center and went public. In 1979 he took over American Stores in Philadephia and through further acquisitions, including a lengthy proxy battle in 1988 for Lucky Stores in California, built the company into 574 retail outlets.
Other American Stores holdings are Acme Markets in Phiadelphia, Jewel Food Stores in the Midwest, Jewel-Osco Stores in New Mexico, Osco Drugs in 20 states and Sav-On in Southern California and Nevada.
The company didn't have a retail presence in Utah until it opened Kaps Kitchen and Pantry at 6200 S. Highland Drive last week. It closed some Alpha Beta stores several years ago. The company will open a grocery store in connection with its 24-story corporate headquarters building that is under construction at 300 South and Main Street.