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Executive Summary

Pay'n Save has found a suitable Trump-fit which will allow management to retain operating control of the chain's diversified business. On Sept. 13, the chain's board approved a revised $357 mil. merger offer by a group of investors headed by NYC-based Trump Group and including top Pay'n Save officials. In a Sept. 13 press release, the Trump Group said it would make a tender offer of $23.50 per share for Pay'n Save's 15.2 mil. outstanding shares, contingent on at least 51% being tendered. The investors said that the offer satisfied the objections of two Pay'n Save directors, Samuel Stroum and Stuart Sloan, who last week voted against accepting the Trump Group's original $342 mil. proposal, or $22.50 per share ("The Pink Sheet" Sept. 10, p. 7). The new deal came after Stroum and Sloan, the two largest Pay'n Save shareholders, announced plans to find a no-Trump alternative to the New York group's bid. As part of the new offer, high card-holders Stroum and Sloan will be paid $3.3 mil. plus expenses for an option on their 2.8 mil. shares, which is about 18% of Pay'n Save's outstanding common. In a statement issued after the Pay'n Save board voted to accept the first Trump proposal, Stroum and Sloan said they "didn't like" the "skimpy price offered" nor the "unseemly haste with which the board acted on this proposal." The two added that they also objected to "lock up" provisions -- including the transfer of almost 27% of Pay'n Save common to a wholly owned subsidiary of the Trump Group -- designed to deter other suitors. Stroum and Sloan said that "we particularly don't like the haste and these lock-up measures in a deal in which the three top members of Pay'n Save senior management (as well as other officers) will be equity partners of the buyer and keep their jobs running the company -- where their financial interest is in conflict with their responsibilities to the company's stockholders." The dissenting board members acquired their stake in Pay'n Save earlier this year as part of the chain's acquisition of Schuck's Automotive Supply, a retail operation of which Stroum and Sloan were officers. The chain's aggressive diversification program -- which includes the Schuck's acquisition, the purchase of the whslr. Northwestern Drug, and an experiment in membership warehousing -- had lowered the chain's value on "The Street" since the first of the year. The Trump Group deal removes the threat of an unfriendly takeover, and allows the chain's management to continue its diversification efforts.

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