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comprised of Acme Markets, Inc., Jewel Food Stores, Star Market
and Jewel OSCO; American Food and Drug, Inc., comprised of Skaggs
Alpha Beta and Buttrey Food-Drug; American Drug Stores, Inc., a
nationwide drug chain; and Alpha Beta Company (Alpha Beta).
During the 1989 tax year, American Stores also acquired and
commenced operations through Lucky Stores. Lucky Stores operated
food stores in California, Arizona, Nevada, and Florida.
Acquisition of Lucky Stores
In December 1987, the second and third largest grocery store
chains in the State of California, Vons and Safeway, merged.
American Stores determined that acquiring Lucky Stores would
complement Alpha Beta’s operations in California. On March 21,
1988, American Stores initiated a hostile takeover bid or tender
offer for all the outstanding shares of Lucky Stores for $45 per
share (tender offer). At the time of the tender offer, Alpha
Beta stores constituted California's fourth largest retail
grocery chain. Alpha Beta operated 252 supermarkets in
California, 54 in northern California, and 198 in southern
California. Lucky Stores operated 340 stores located throughout
California, and it was the largest grocery store chain in the
State of California.
On May 23, 1988, American Stores amended its tender offer
increasing the offer to $65 for each Lucky Stores share. This
increase in price was attributable, in part, to competing bids by
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