Dayton Hudson Corp. yesterday said Washington's Haft family was aggressively buying shares of the Minnesota-based retailing giant, but told the Hafts it did not want to be taken over.
Additionally, Dayton Hudson's chairman, Kenneth A. Macke, urged Minnesota Gov. Rudy Perpich (D) to call an emergency session of the state legislature to strengthen Minnesota's antitakeover law to make it harder for Dart or other hostile bidders to take over any Minnesota company.
The nation's sixth-largest department store operator, in a letter to its employes yesterday, said it is determined to remain independent. "We are communicating today with an aggressive buyer of our stock that we are not interested in being acquired," Dayton Hudson told its employes.
Although the company did not name the stock acquirer in its letter, Dayton Hudson officials said it was Dart Group Corp. -- the Landover holding company controlled by the Hafts.
Dart declined to comment.
Rumors of an impending takeover bid for Dayton Hudson have been circulating on Wall Street for two weeks, making the company's shares one of the most actively traded on New York Stock Exchange. Since the beginning of June, its price has climbed from $46.25 to $56.25 where it closed yesterday -- an increase of 25 cents from the day before.
Even more significant, more than 22 million shares of Dayton Hudson's stock have been traded since June 1, accounting for more than 24 percent of the company's outstanding stock.
Dayton Hudson, with revenue of $4.4 billion and profits of $255 million, is considered one of the nation's leading retailers. Among its chains are: Dayton Hudson department stores in the Midwest, the discount department store chain Mervyn's in the West; Target, an upscale discount store, in the Midwest, and Lechmere, a consumer appliance and household merchandise chain in the Northeast and Southeast.
In recent years, sharp competition and the downturn in the economy in the oil-producing states has hurt Dayton's earnings, particularly in its Mervyn's division, which had been one of the company's star operations. Increased competition also put its toll on another Dayton Hudson chain -- B. Dalton Bookseller -- one of the reasons why Dayton Hudson sold the chain last year.
With 97.4 million shares of Dayton Hudson's stock outstanding, any acquisition would be a costly one. At the current stock price of $56.25, the merger would cost about $5.7 billion, making it one of the most expensive retailing takeovers ever.
Some financial analysts think the price could go far higher -- climbing all the way to $7 billion -- before a takeover could be successful.
"We think the company could be worth $70 a share," said Glenn E. Johnson, a financial analyst with the Minnesota investment firm Piper Jaffray and Hopwood Inc. "We are confident Mervyn's will turn around and, given the growth potential of Target and Mervyn's," the stock is very attractive over the long-term, Johnson said.
"It is fairly attractive, given the operating divisions and the fact that Dayton Hudson owns about half the real estate of their stores," added Mark Witmer, a financial analyst with the Minneapolis firm Wessels, Arnold and Henderson.
For the past two years, Dart has been eying a number of retail companies as takeover targets. Its most recent bid -- which was unsuccessful -- was for the New Jersey-based retailer Supermarkets General Corp. That offer came after Dart failed to win its $3.9 billion bid for the nation's largest supermarket chain, Safeway Stores Inc.
Although Dart has so far not yet succeeded in acquiring a company, it has made more than $200 million in profits from its attempts -- largely by buying the stock at a low price and then selling it for a large gain after the price is driven up -- either on the rumors that Dart is interested in acquiring the company or by another takeover offer made to thwart the Hafts.
Given the Haft's history, retailing officials yesterday wondered if the Hafts really wanted to buy Dayton Hudson or rather wanted a profit in their stock investment. "Based on their past experience, I think Dart is just trying to make a lot of money buying the stock and then selling out after it is increased from the rumors," commented Kurt Barnard, editor and publisher of Barnard's Retail Marketing Report.
Nonetheless, it was clear that Dayton Hudson was taking the Dart's accumulation of stock very seriously. "Dayton Hudson is really running scared right now," commented analyst Witmer.
Dayton Hudson officials, who met with Perpich Thursday, hope the Minnesota state legislature will convene by the end of next week to enact a stricter antitakeover law that would make it more costly for any company buying the retailer. The law would prevent the acquirer from selling off Dayton-Hudson assets to help pay for the takeover for at least five years after the takeover. Another provision in the proposed legislation would bar any takeover bidder from voting on the proposed acquisition, thus making it more difficult for the bidder to meet Dayton Hudson's corporate rule that 75 percent of all outstanding stock must be cast in favor of a merger if the board of directors does not approve the merger.
Perpich's office said the governor was expected to make a decision on whether to call a special session of the legislature early next week. With 34,000 workers, Dayton Hudson is Minnesota's largest employer.