The oft-stated goal of Washington's Haft family to make a major acquisition is under scrutiny again following last week's announcement that the Hafts' Dart Group Corp. wants to acquire Stop & Shop, a Boston-based operator of department store and supermarket chains.
Like previous Haft targets, Shop & Stop is expected to fight the unsolicited takeover offer. But a stronger test of the Hafts' commitment to owning a national retail company is likely to come as a result of an expected surge in industry acquisitions.
Campeau Corp.'s announcement Monday of a $4.2 billion bid for Federated Department Stores Inc. is regarded by many analysts as the beginning of such a surge. They point to a downturn in retailers' stock prices as the cue for a shopping spree by corporate raiders and other investors seeking bargains in the industry.
"There are still some good values out there and tons of real estate" owned by retail companies, said Eliot Benson, director of research and vice president at Ferris & Co.
Much of that real estate is said to be worth substantially more than what's listed among the assets of many retail companies. In any event, analysts believe that some potential buyers of retail firms are more interested in owning the underlying real estate than the retail operations themselves.
Thus, retail chains considered less valuable than their real estate holdings could be split up and sold off after being acquired. Other companies could be dismantled to help pay off debt incurred in their takeovers. In other instances, less profitable retail divisions may be sold by new owners who prefer holding on to more prestigious units with greater cash flows.
A company like Dart Group, ostensibly looking to buy a nationally known retail company, could pick up some valuable outlets in major markets under any of those scenarios. Dart could have bought Garfinckel's or the several other prominent divisions of Allied Stores that Campeau sold last year after completing its unexpected raid on Allied.
Instead, Dart chose to pursue its strategy of launching hostile takeover attempts -- eight in less than three years -- against major retail companies, most notably Safeway Stores Inc. Virtually every time the Hafts bought shares in one of those companies, they indicated interest in a buyout but wound up selling back their stock at a substantial profit.
"They do have a history of making runs at retail companies," said William N. Smith, an analyst at Smith Barney, Harris, Upham & Co. "I don't know what's in Herbert and Robert Haft's minds. Even when they had the option to run some of Safeway's operations, they declined for whatever reason."
Dart launched a takeover bid of $3.54 billion for Safeway in 1986 but walked away from a takeover fight and sold for $59 million an option to become a 20 percent owner of a new holding company that was formed to acquire Safeway.
The pattern is a familiar one by now, but the strategy has not consistently focused on a particular retail segment or area of expertise. Dart's takeover attempts have run the gamut of retailing, from leading drug chains (Jack Eckerd Corp. and Revco Corp.); to major department store companies (The May Co., Federated Department Stores Inc. and Dayton Hudson Corp.); to big supermarket chains (No. 1 Safeway and Supermarkets General), to Stop and Shop, which can't be called an industry giant in any of its retail segments.
Robert Haft has maintained for two years at least that he and his father want to own a major retail company. Their aborted runs at seven companies before targeting Stop & Shop have hardened cynicism in the investment community about their public declarations.
Another major breakup of a retail company, similar to Campeau's dismantling of Allied, would provide a stiff test of the Hafts' resolve to buy a major retail company. In fact, that resolve is being put to the test now by Mobil Corp.'s recent announcement that it may sell Montgomery Ward & Co. after weighing offers from several investors that have expressed interest in acquiring Mobil's retailing subsidiary.
Owning Montgomery Ward, the country's eighth-largest retailer, would give the Hafts an immediate share of a national market as well as control of a company that continues to show dramatic improvement after a long and difficult struggle to survive.
It remains to be seen, however, whether the Hafts can run a retail operation that large. Despite boasts that they could do a better job of managing Safeway and Dayton Hudson, the Hafts' experience as retailers has been confined to operating the Dart Drug chain, which they sold in 1984, and two regional discount chains -- Trak Auto Corp. and Crown Books Corp.
Neither of the two discount chains have had sparkling earnings results of late, a retail analyst points out. Trak Auto's net income fell from $4.6 million in fiscal year 1984, to $3.2 million the next year, then plummeted to $797,000 before edging up to $1.3 million last year. Crown's earnings rose from $4.9 million to $6.5 million and stayed flat before dropping back to $5.5 million in fiscal 1987.
Another round of takeovers in the retail industry could present Dart Group with an opportunity to acquire larger and more profitable retail operations.
At the same time, a shakeout among major retailers might reveal more about the Hafts as ambitious and sincere businessmen, shrewd investors or disingenuous corporate raiders.