Jack Eckerd Corp. will fight Dart Group Corp.'s attempt at a hostile takeover by suing Dart for violating federal securities laws in its purchases of stock in the drugstore chain, Eckerd Corp. announced yesterday.
Officials from Dart Group, the Landover holding company that formerly owned Dart Drug Stores -- then the nation's largest chain -- could not be reached for comment.
Florida-based Eckerd, the nation's second-largest drugstore chain, said in a lawsuit filed in U.S. District Court in Wilmington, Del., that Dart Group has violated federal securities laws in its acquisition of Eckerd stock.
Dart Group, owned by Herbert H. Haft and his family, notified the Securities and Exchange Commission last week it had acquired 5 percent of Eckerd's stock for $46.5 million and said it was considering buying 100 percent of the firm's stock after a waiting period, usually about 20 days, required by federal antitrust laws.
Following a special meeting yesterday of its board of directors, Eckerd reiterated that the company is not for sale and is opposed to the takeover bid by Dart.
Eckerd's stock on the New York Stock Exchange closed yesterday at 29 1/2, up 1/4.
In a move aimed at preventing Dart from making further stock purchases, Eckerd alleged in a suit filed in federal court that Dart falsely stated in its Schedule 13D form filed with the SEC that it purchased Eckerd common stock for investment, when its real intention was to gain control of Eckerd.
Eckerd also alleged that that Dart may be trying to extract "green mail" payments from Eckerd, forcing the company to buy back shares at a premium price.
Eckerd further alleged that Dart is engaged in an illegal "creeping tender offer" for Eckerd stock, a tactic of slowly increasing shares in the company through open market purchases.
Eckerd also announced yesterday that its principal lending banks are willing to increase its existing lines of credit to more than $1 billion. The increase in credit would give the firm the financial flexibility to take steps to fight the takeover bid.
"If the company decides to increase these existing lines, the additional funds would be used for general corporate purposes," Eckerd said in a brief statement issued yesterday.
Dart said it purchased 1.8 million shares of Eckerd stock in late May, shortly after the price dropped substantially because of Eckerd's announcement that it expected its third-quarter earnings to drop by half from last year's level.
Industry officials have said that Dart has the money to buy Eckerd, with the huge sum of cash in its coffers from its $160 million sale last year of the 73-store Dart Drug Store chain.
According to Chain Drug Review, Eckerd now stands just behind Walgreen Co. in the ranking of chain drugstores.
Sales in 1,511 stores in 15 states totaled $2.6 billion, and profits were $85.4 million for its fiscal year ended July 28, 1984.
Industry experts say that although Eckerd is one of the largest chains, it has had difficult times over the past few years, including problems associated with the acquisiton of American Home Video, a chain of 207 specialty video stores that has consistently lost money.
Despite having lost money recently, Eckerd is still one of the best in the industry, one industry official noted.