Burkle’s Pathmark Bid Contested

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Lampe Conway & Co. LLC, a New York-based hedge fund, said it will vote to reject a bid by Yucaipa Cos., led by Los Angeles billionaire Ron Burkle, for a 40 percent stake of the struggling supermarket chain Pathmark Stores Inc.


Lampe Conway’s opposition to Burkle’s proposed $150 million investment in Pathmark was disclosed Friday in a Securities and Exchange Commission filing. Richard F. Conway, a principal of Lampe Conway, which has a 4.4 ownership stake in Pathmark, wrote to James L. Moody, the chairman of Pathmark, in a May 26 letter included in the filing that Lampe Conway’s opposition is the result of Pathmark’s not providing enough information about alternative bids.


“We requested that the company’s board allow the bidders to discuss their proposals for acquiring the company with us and other shareholders,” Conway wrote. “We are disappointed that you refused that request and that the company has failed to provide adequate disclosure regarding the auction process.”


In the letter, Conway said his firm will vote against Yucaipa’s bid at a June 9 shareholder meeting, and that Institutional Shareholder Services, a leading proxy adviser, will recommend that its clients also vote against the transaction.


Pathmark said in a SEC filing released Thursday that the company on May 24 turned away a bid by an unidentified entity to acquire all outstanding shares from stockholders at $8.75 per share. The offer was one of many made by the entity, which had previously proposed to pay $8.30 per share.


Burkle’s March offer to invest $150 million in Pathmark involves the issuance of 20 million new shares at $7.50 each. Burkle also would get warrants to buy 10 million shares at $8.50 each, and a final 15 million of 10-year warrants at $15 each. Pathmark’s board also plans to give Yucaipa five of 11 board seats.


In its filing, Pathmark said the unnamed bidder made earlier offers, but that the latest offer was “still dependent on obtaining debt financing and included a commitment letter for such financing that contained conditions precedent that the company’s management did not expect to be achievable.”


This year, Burkle also purchased 9.2 percent stake in specialty supermarket chain Wild Oats Markets Inc., based in Colorado. Burkle has a history of buying and selling grocery properties, including Alpha Beta, Ralphs Grocery Co. and Fred Meyer.

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