Stop & Shop Cos. Inc., trying to thwart a takeover bid by Washington's Haft family, announced yesterday that it is negotiating with "several parties" interested in buying the company, which operates the nation's ninth-largest supermarket chain.
The New England retailer, which also owns the Bradlees department stores, said "a number of these parties have submitted proposals for a possible acquisition" of all of Stop & Shop's stock.
Stop & Shop officials declined to name the parties with whom it was negotiating, but sources close to the company said that four groups were involved, and that they were primarily investment bankers -- not other corporations aiming to merge the Stop & Shop operations with their own.
The announcement drove Stop & Shop's stock price up $2.375 yesterday to close at $41.50, with 1.5 million shares traded.
Speculation yesterday centered primarily on Boston financier Thomas H. Lee as the leading contender. Lee, who declined to comment, has earned a reputation in Boston as the king of local leveraged buyouts, having acquired more than three dozen companies in the past few years.
Sources added that the negotiations did not include the Haft family, which launched a takeover bid for the Boston company earlier last month, initially offering $860 million to buy Stop & Shop. Herbert Haft and his son Robert -- who head Dart Group Corp., Crown Books Corp. and Trak Auto Corp. -- subsequently raised their bid to $1 billion in an effort to win approval by Stop & Shop.
But Stop & Shop, calling the Hafts' highest $37 offer inadequate, has rejected their bid and made it clear it was actively seeking other offers.
Robert Haft, however, said two weeks ago that his family intended to bid against "any higher bona fide offer" if a counterproposal is made.
The Hafts' tender offer is still on the table. However, when asked whether the Hafts would raise their bid, the spokesman added, "It is premature to respond until we know the details of any alternative proposal."
Stop & Shop, which last year had $55.7 million in profit on $4.3 billion in retail sales for the year ending Jan. 30, warned yesterday that "no assurances can be given, however, that such negotiations will result in a definite transaction."
However, company sources added that a decision could come as early as this week.
Yesterday, most sources close to the company were betting that Stop & Shop was planning a leveraged buyout that would permit the company's management to retain control instead of turning the operations over to another firm.
In a leveraged buyout, a company's assets are used as collateral to obtain financing to buy the publicly held stock. The company is then taken private, and some of its assets usually are sold to help reduce the debt incurred from the takeover.
Lee has emerged as a logical candidate, given his Boston ties and involvement in small and medium leveraged buyouts over the past few years. Since 1980, his firm has realized gains of 600 percent on the equity it put into companies it later sold.
Partly based on that track record, Lee and Merrill Lynch Inc. last fall raised $420 million in a new ML-Lee Acquisition Fund. The money will be used to finance leveraged buyouts.
Other names being mentioned as possible buyers of Stop & Shop include Kohlberg Kravis Roberts & Co., the financial investment firm that has financed scores of leveraged buyouts, including the one by Safeway Stores Inc.'s management 18 months ago when it was threatened by a similar takeover from the Haft family.
The Hafts' bid for Stop & Shop is their fourth attempt to buy a major retailer in two years. The Hafts also bid for Supermarkets General Corp. and Dayton Hudson Corp. Although unsuccessful in their bids, the Hafts have usually earned millions of dollars in profits from their attempts through the sale of stock in the targeted company.
The Hafts have a 2.7 percent stake -- or 738,200 shares -- which they purchased for about $20 each, according to documents filed with the Securities and Exchange Commission. Based on yesterday's closing stock price for Stop & Shop, that would mean the Hafts have seen the value of their shares rise by about $16 million.