Dart Drug Corp. had decided to take on a partner for its Crown Books division in a maneuver that could simultaneously brighten Dart's balance sheet and pave the way for expansion of Crown.
Dart announced it has agreed to sell 50 percent of Crown Books to Thrifty Corp. of Los Angeles for $12.1 million.
Thrifty is already Dart's partner in Crown Books West, a California clone of Crown that operates stores in Los Angeles similar to the ones in the Washington area.
Dart officials said the new deal with Thrifty will provide "unified management and ownership" of the East and West Coast book chains.
Robert W. Haft, already president of Crown and Crown West, will continue as chief executive of the new joint venture.
Haft, who started Crown four years ago shortly after graduating from Harvard Business School, is the son of Dart founder, chairman and president Herbert H. Haft.
The decision to spin off Crown as a joint venture with Thrifty fueled speculation that young Haft may try to make Crown the first nationwide discount book store chain. Crown is already the biggest discount book seller in the country, with 25 stores in the East and 16 more in California, offering best sellers at 20 percent to 35 percent less than list price.
In an interview with The Washington Post this spring, young Haft noted that his father was one of the pioneers of the discount drug store business and indicated he hoped to do the same for books.
Dart officials declined to comment on plans for Crown or the use they will make of the $12.1 million. Selling a half-interest in Crown to Thrifty could provide needed cash for Dart, whose working capital dropped almost $1 million last year because of heavy spending on remodeling drug stores and expanding Crown.
That cash could help Dart pay off the $9 million in new short-term loans the company took out last year. The heavy borrowings required Dart to pay almost $1 million more in interest than the previous year. The interest expense was one of the major factors in a decline in Dart's profits from $3.6 million ($2.02 a share) to $1.4 million (83 cents).
The transaction is expected to be completed next February, after the close of Dart's fiscal year. Thrifty will buy half the East Coast Crown's inventories. It will not purchase any of the store properties, all of which are leased, in some cases from Dart or its affiliates.
Dart has never disclosed how much Crown contributed to the Landover chain's $259 million in sales last year, nor if the subsidiary has made any money. Whether or not Crown's sharp discounts and heavy advertising add up to profitability, the chain has had a tremendous impact on the book business in Washington.
Several small bookstores have gone out of business since Crown was started. Rival booksellers compalin that Crown's discounting of best sellers has taken away the high-volume, high-profit business that enabled them to stock slower-moving titles.
Industry estimates are that total book sales in the Washington area have increased 60 percent in the past four years, at least in part because Crown is attracting customers ignored by traditional book stores. Washington now is considered the fourth-largest book market in the country, behind New York, Chicago and Los Angeles.