By  on April 11, 2005

NEW YORK — ShopKo Stores Inc. said last week that it is being acquired for $1.05 billion by a private equity firm, which will take the regional discounter private.

The Green Bay, Wis.-based retailer said on Friday that the acquirer is an affiliate of Minneapolis-based private equity investment firm Goldner Hawn Johnson & Morrison Inc. The acquisition  is expected to close by the end of ShopKo’s second fiscal quarter of this year.

Shareholders of ShopKo’s common stock will receive $24 in cash for every share held. There are 2.98 million ShopKo shares outstanding, excluding options. The cash per share represents a slight premium to the recent $23 trading range of ShopKo shares on the New York Stock Exchange. The cash component of the transaction is $715.2 million, and the private equity firm will assume about $330 million in ShopKo debt.

ShopKo said its board already approved the transaction. Commitment letters have been obtained for the debt financing from Bank of America, ShopKo’s principal lender, as well as an affiliate of the bank, Backbay Capital Financing. The deal is still subject to shareholder approval, as well as the usual regulatory approvals.

Sam Duncan, president and chief executive officer, elected not to remain with the retailer after the transaction closes. ShopKo said other members of the retailer’s senior management team are expected to stay, and “may invest in the company.”

Jack Eugster, ShopKo’s chairman, resigned his post on Friday, but will remain as a board member while the deal is pending. Eugster will have an ongoing equity investment in ShopKo as part of the financing, ShopKo said, and will become chairman after the deal closes. He is also expected to take on the role of acting ceo until a new president and ceo is named.

Board members John Turner and Steve Watson were named co-chairmen during through the deal’s transition.

ShopKo operates 140 ShopKo stores; 220 Pamida stores and three ShopKo Express Rx stores, a new neighborhood drugstore concept. With more than $3 billion in annual sales, the stores are located throughout the Midwest, Mountain and Pacific Northwest regions.

Last month, the company said it planned up to $60 million in capital expenditures for fiscal 2005, which was to be funded from operating cash flow.The regional discounter also said  fourth-quarter income for the three months ended Jan. 29 rose 12.3 percent to $35.4 million, or $1.19 a diluted share, from $31.6 million, or $1.07 a share, in the same year-ago period. Sales declined by 4.5 percent to $909.6 million from $952.9 million.

Income for the year rose 10.8 percent to $43.3 million, or $1.46 a share, from $39.1 million, or $1.33, in fiscal year 2003. Sales inched downward by 0.5 percent to $3.17 billion from $3.18 billion.

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