DART PLANS TO ALTER SHOPPERS FOOD OWNERSHIP

ELLIOT ZWIEBACH

LANDOVER, Md. -- Dart Group Corp. here, which owns 50% of Shoppers Food Warehouse, Lanham, Md., said it will probably initiate action within the next 60 days that could lead to a change in ownership for the 34-store chain.

The 50% of Shoppers' equity that Dart doesn't own is controlled by Kenneth Herman and his family, who manage the company under a shareholders' agreement with Dart.

Robert Herman, Shoppers' executive vice president and chief operating officer -- who is Kenneth Herman's son -- told SN the retailer has not yet decided what it will do if Dart initiates any action. "But we want to be masters of our own destiny, so we are looking to see what's in the marketplace that we can take advantage of to move the process along," he noted.

Shoppers has hired Lazard Freres, a New York-based investment firm, "to put out information to solicit different proposals from the marketplace," Herman said. "Our options range from A to Z, and we're looking at all possibilities. But we have not made any decisions on what we will do, or if we will do anything."

According to Larry Schafran, chairman of Dart's executive committee, "Shoppers is a substantial asset that we don't control, and the Washington-Maryland market [where Shoppers operates] is highly competitive. And we think we can make better use of that capital.

"I believe that, if we gained majority control, we would decide to sell the company."

Local observers -- who estimate Shoppers' value at more than $200 million -- said Dart's motivation for selling its Shoppers stake is to raise enough funds to buy out the share of Dart controlled by Herbert Haft, Dart chairman, whose legal dispute with his son Robert over control of some Dart Group assets has complicated the company's financial management.

Dart's retail holdings include Trak Auto, Crown Books and Total Beverage. Shoppers was founded in the 1940s by members of the Herman family; in 1988, Kenneth Herman's brother and brother-in-law sold their stake to Dart Group for $17.5 million.

Dart or Shoppers can initiate a change of ownership in the chain by exercising a buy-sell clause in their shareholders' agreement, according to Schafran. Under that clause, the owner that starts the process must set a price, after which the responding party has 120 days to buy out the initiating party or to sell its own 50% stake to the initiating party. If the responding party does not indicate what it wants to do within the 120-day period, then it is deemed to have opted to sell its stake, he explained.

Schafran said he expects Dart to exercise the buy-sell clause "sooner rather than later -- probably within 60 days." However, he noted that Shoppers could initiate the clause before Dart takes any action.

According to Schafran, whatever course Dart chooses to pursue would require approval by its board of directors and various other parties connected with Dart.

"If everyone agrees to an action, then we can proceed. But if any of the parties raises an objection, we would have to ask the judge in Delaware Chancery Court for permission to move forward," he said.

The Chancery Court has been designated as an arbiter in Dart's financial decisions following the still-unresolved dispute within the Haft family. Because of that dispute, Herbert and Robert Haft have signed a standstill agreement that requires Chancery Court approval for any financial dealings, Schafran explained.