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JACK ECKERD DEFLECTS DART WITH $55.6 MIL. REPURCHASE OF SHARES

Executive Summary

JACK ECKERD DEFLECTS DART WITH $55.6 MIL. REPURCHASE OF SHARES held by Dart Group in its aborted takeover attempt of the Clearwater, Florida-based drug chain. Eckerd announced on July 15 that it had repurchased "the 1,884,000 shares of the company,'s common stock owned by Dart [approximately 5% of Eckerd outstanding shares] at a price of $29.50" -- - the closing price of the stock on Friday, July 12. "Simultaneously," the release adds "Jack Eckerd and Dart Group agreed to terminate all pending litigation between them." Following its purchase of a 5% stake in Eckerd in May, Dart threatened a takeover in a 13D filing with the Securities & Exchange Commission. The firm subsequently announced it had engaged E.F. Hutton to act as its financial advisor in Dart's challenge for Eckerd ownership. Based on its market investment of $46.5 mil. for a 5% stake in Eckerd, the buyback agreement gives Dart a quick profit of approximately $9 mil. The $9 mil. return on its Eckerd investment adds further to the Dart Group's sizable cash position. At the close of fiscal 1985 (ended Jan. 31.), Dart reported cash and marketable securities of $204.2 mil. In the spring of 1984, Dart sold its drug store business to a management group for $160 mil. Prior to Eckerd, Dart made a takeover move for another retail business, May Department Stores, which also went unconsummated. Even after the $55.6 mil. paid to Dart for repurchase of its stock, Eckerd also is cash rich. Partly as a defensive measure, during the first week of July the chain announced the separate divestments of its JByrons department store chain for an undisclosed sum to Amcena Corp. and its American Home Video chain to Tandy Corp., which Eckerd estimated should bring in approximately $100 mil. after tax. The 55-store JByrons chain had sales of $220 mil. in FY 1984 with operating earnings of $7.9 mil. -- down 29% from the previous year. American Home Video, with sales of $156 mil. in FY 1984, has consistently lost money since its acquisition by Eckerd in 1981. Eckerd's sale of JByrons, American Home Video, and Eckerd Apparel since March could move the chain back to the high profit end of the chain drug industry. The chain's diversification over the past few years, particularly the acquisition of American Video, had cut into the relatively high profit margins of Eckerd's drug store business. Eckerd's net profit margin had declined to 3.3% in the most recent fiscal year from the 4.5 -- - 4.9% margin range during the late seventies. The retirement of the nearly 1.9 mil. shares repurchased from Dart and the divestiture of Eckerd's less profitable businesses should also have a positive impact on the chain's earnings on a per share basis. Any positive effect is unlikely to be felt during the current fiscal year, which ends July 30. Through the first nine months of fiscal 1985, Eckerd's net earnings per share were down 7% to $1.68.

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