L.S. "Sam" Skaggs, the Utahn whose grandfather founded a single grocery store that eventually became the giant food and drugstore chain American Stores, has agreed to sell his 18 percent stake in the Salt Lake-based company in a two-phased stock sell-off that would net him, his family and some trusts approximately $1.3 billion.
The deal apparently puts to rest what was viewed last year as a power battle between Skaggs and Victor L. Lund, who replaced him as chairman of the Fortune 500 retailer in June 1995, when Skaggs stepped down citing health problems.It also would end a family retailing dynasty that began in 1915 when Skaggs' grandfather, Samuel M. Skaggs, opened Skaggs Cash Store in American Falls, Idaho.
American Stores spokesman Daniel J. Zvonek told the Deseret News Friday that the deal will be done in two phases. American Stores will buy back 12.2 million of Skaggs' shares at $45 per share, Thursday's closing price. (In early trading Friday, the company's shares had declined slightly to $44.87.) That phase would net Skaggs $550 million. The company would finance the repurchase.
In the second phase, a secondary offering would be made to the public, the price to be determined at the time, for an additional 14.7 million to 16.4 million shares.
"When you add up all the pieces, it comes to almost $1.3 billion," said Zvonek, director of investor and public relations for American Stores.
The deal is expected to close within 60 days of American Stores filing a registration statement with the Securities and Exchange Commission. The filing is expected to take place next month after the company releases its quarterly earnings report.
The company said that the repurchase and the secondary offering will occur simultaneously. If the price to the public were to be less than $45 per share, Skaggs has the right to terminate the offering, and the company could then buy back those shares.
The deal requires that Skaggs observe a 10-year "standstill" agreement, which restricts purchase and sale of American Stores shares, proxy fights and other such actions. If the deal falls through, for whatever reason, the standstill agreement is shortened to 21/2 years.
Zvonek said American Stores is pleased with the deal.
"There has been some uncertainty with regards to the Skaggs family's stake in the company. This puts those questions to rest. We will now focus on going forward."
Skaggs left active management of the company in 1988 and stepped down as chairman of the board in 1995, but he still remains a director. Zvonek said Skaggs has indicated that when his stake in the company falls below 5 percent, he will resign from the board.
Last year, Skaggs, 72, told the SEC in a filing that he was considering selling his then 26.4 million shares in the company. He also said he was exploring other options, including a change in the company's management or possibly breaking it up.
As the company's single largest shareholder he would have needed to attract 32 percent to attain majority control, according to the Wall Street Journal.
As a result, American Stores' directors amended the company's share-holders' rights plan to reduce the ownership threshold at which the rights are triggered from 20 percent to 10 percent, a so-called "poison pill," which makes acquisition of the company prohibitively expensive for anyone the board doesn't like, according to Joele Frank, an analyst with Abernathy MacGregor Scanlon, a New York investment firm.
Last year, Skaggs hired the New York firm Goldman, Sachs & Co. to advise him on what to do with his family's American Stores stock.
In a statement released Friday, Lund said the agreement is designed to further the best interests of the company while permitting the "orderly sale" of Skaggs' shares.
"This transaction will enable the company's management and associates to focus fully on carrying out our business strategy, including the Delta initiatives designed to transform the company from a holding company to a unified operating company. The repurchase program will be slightly accretive to our earnings per share and will not affect our aggressive capital spending program."
American Stores is constructing a $100 million, 24-story world corporate headquarters on the northeast corner of 300 South and Main in downtown Salt Lake City.
A Skaggs spokesman issued a statement Friday saying the family was pleased with the deal. "As the largest shareholders in American Stores, the objective of the Skaggs family has always been to enhance long-term shareholder value," the spokesman said.
Skaggs, who is well-known for being inaccessible to news media, was not available for comment.