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OSCO DRUG WILL BE ONE OF THREE AUTONOMOUS OPERATING UNITS

Executive Summary

OSCO DRUG WILL BE ONE OF THREE AUTONOMOUS OPERATING UNITS within the American Stores group after reorganization. "In an effort to manage the company's assets more efficiently and effectively . . . the board today approved an internal management restructuring in which the company's operating subsidiaries will be managed and operated on a more decentralized basis," American Stores Chairman L. S. Skaggs told shareholders in a recent letter. "While American Stores Company will continue as the holding company it is now," Skaggs continued, "our businesses will be grouped for operating and administrative purposes into three new organizations comprised of: (1) a western food group, consisting of Alpha Beta Company and Skaggs Alpha Beta, Inc.; (2) our national drug operation, Osco Drug, Inc.; and (3) an eastern food operation, comprised of Acme Markets, Inc., Jewel Food Stores and Star Market Company." The restructuring would facilitate the spinoff of the company's 654-store drug chain, which includes 483 Osco and 171 Sav-on drugstores, should American Stores decide to make that move in the future. "Among the ideas which will be studied is a possibility of spinning off to stockholders some or all of the company's operating units or regional operations and the public sale of minority interests in the company's subsidiaries," the letter states. "Should a decision be made to effect any of these transactions, the internal management restructuring referred to above will greatly facilitate the process." The company noted that because of tax considerations such a change would not likely be made before the end of 1989. Under the reorganization, Exec VP Scott Bergeson becomes chairman of Osco Drug, and the duties of Richard George, who serves as president of both Osco and Sav-on, will be consolidated in the position of president, Osco Drug. "Decentralizing management and operations in these logical geographical and functional groupings will allow for more intensified and regionalized management, bringing decisionmaking and operational responsibility closer to both our customers and employees," the company emphasized. The letter to shareholders also outlined a proposed shareholder rights plan, which would go into effect if and when an unfriendly suitor acquires 20% of American Stores outstanding stock or announces a tender offer for 30% or more of the retail chain's stock. The dividend distribution plan does not apply to American Stores Chairman L. S. Skaggs, who controls nearly 20% of the company's stock and sits on the board of a bank with control over another 4.2% of American Stores. The chain said that the rights "are not being distributed in response to any specific effort to acquire control of the company, and the board is not aware of any such effort."

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