BOARD OF STRAWBRIDGE MULLS SELLING THE FIRM
Byline: Valerie Seckler
NEW YORK — Strawbridge & Clothier said Thursday its board intends to consider a proposal for the sale of the company, which could result in a tax-free distribution to shareholders of about $20 a share.
Despite the announcement, Strawbridge’s stock lost 1 7/8, or 8.8 percent, to close at 19 3/8 Thursday, as 235,800 shares changed hands. The issue’s average daily volume is 66,800.
The lack of specific information from Strawbridge could have raised questions about whether the sale would go through, and caused the drop in the stock price.
Peter S. Strawbridge, president of Strawbridge, said Thursday it was “not yet appropriate” to comment on the terms of a deal or its players.
The retailer, with sales of $980.6 million in 1995, said any deal for its 13 Strawbridge & Clothier department stores and 27 Clover discount stores hinges on “the resolution of a number of important issues.”
May Department Stores Co. reportedly wants most of the Philadelphia-area Strawbridge units; Federated is said to be a player for some locations. Kimco Realty Corp. of Hyde Park, N.Y., the nation’s largest owner of strip centers, and The Rubin Organization, a Philadelphia-based real estate company, reportedly together made an offer for Clover.
Thursday Strawbridge reported weak fourth-quarter and full-year results and said cost cuts should bolster the bottom line this year.
The board has deferred a cash dividend on its series A and series B common stock.
Hammered by harsh winter storms, high consumer debt and heavy markdowns, fourth-quarter earnings plunged 33 percent to $13.6 million, or $1.28 a share, from $20.3 million, or $1.93. Sales slid 2.3 percent to $337.9 million from $345.8 million. Same-store sales dropped 5.7 percent.
For the full year, Strawbridge lost $8.8 million against profits of $30.1 million, or $1.92 a share, in 1994. Sales fell 2.3 percent in 1995, to $980.6 billion from $1 billion.
When the retailer in October retained Peter J. Solomon to explore a sale, merger or acquisition, its stock was trading at $14 a share. Strawbridge stock has climbed as high as 28 1/4 since the October announcement, but lost ground last week on reports that a deal to sell the business was bogged down.
Ironically, the drop in the company’s stock price, coupled with the weak financial results, could spur the deal. “I would imagine the Strawbridges will continue to work on [the deal] because the stock has lost some value,” said a source. “I suspect the stock market went crazy to the point it overvalued Strawbridge’s stock.”
Sources have said efforts are under way to increase the bids, which are about 20 percent below what the Strawbridges want for the department stores and 30 percent below what they’re seeking for Clover.
If Kimco and Rubin acquired the discounter, they would likely sell or lease the units to a variety of discounters and other businesses. Kohl’s Corp. and Target Stores reportedly have shown interest in Clover units.
If a deal can’t be struck with Kimco, Rubin, May Co. and Federated, sources said, it is possible a single purchaser, such as May Co., could acquire Strawbridge then do a tax-free spinoff of the Clover business. — Fairchild News Service