Bid for Kroger:start of new round of retailing raids?

Exactly who gets the fresh lettuce and greens - and who gets the wilted leftovers - is a matter of considerable discussion in the corporate board rooms of the Kroger Company, the second-largest grocery chain in the United States. Kroger, based in Cincinnati, is suddenly under siege. The Haft family of Landover, Md., launched a hostile takeover effort earlier this week. Its Dart Group announced an effort to win a 15 percent stake in Kroger. As a result, Kroger's stock soared $11.75 a share Tuesday to $51.25 on the New York Stock Exchange.

Kroger's response to the takeover bid is an expensive restructuring plan that experts say could cost it at least $3.8 billion. The company would reportedly pay a $40 dividend to shareholders. (Kroger has some 78.6 million shares outstanding.) It would also make an additional $8-a-share payout. And management is reportedly considering a $250 million redemption of its preferred shares.

However the takeover bid turns out, food and retail analysts believe the impact will be considerable:

Kroger itself is expected to pare back its size. That in turn would provide a competitive opening for other large food chains such as Winn-Dixie Stores Inc., Big Bear Stores Company, and Albertson's Inc.

Other giant retail firms are again being discussed as possible takeover candidates, including F.W. Woolworth Company, the Brown Group, and the Zayre Corporation. Yesterday, in fact, Zayre agreed to an $800 million buyout by Ames Department Stores Inc. - to avert an expected takeover by the Hafts. The Hafts have also targeted Woolworth in the past. Retail firms, including food companies, become promising financial ventures during sluggish economic periods, since consumers usually maintain their spending levels for necessities.

Finally, consumers in some areas - particularly the Midwest - might get a break or two at the cash register because of the increased competition expected to grow out of the Kroger restructuring.

For the retail industry in general, what happens to Kroger is of no small importance. ``Kroger is one of the best marketers of brand-name food products in the industry,'' says a marketing official here privately.

What the restructuring will mean in the long run is that Kroger ``will have to sell off some assets and pare down its size,'' says Ed Comeau, an analyst of supermarkets with Oppenheimer & Co. The problem with Kroger, Mr. Comeau says, is that it has been a financial underperformer, marked by flat to declining earnings.

Yet, he says, the supermarket industry in general remains ``highly competitive. You literally can't increase sales by a dollar without taking that dollar from someone else.''

Outstanding performers in the industry, Comeau says, include Albertson's, Giant Foods (in the Washington, D.C., area), A&P, and Lucky Stores. Albertson's and A&P are both major competitors of Kroger in some cities.

Safeway Stores, the largest US food retailer, has already had to restructure itself to prevent the type of takeover threat now facing Kroger. One result, however, according to some analysts, is that Safeway is now a somewhat lesser force in the industry.

Kroger operates 1,300 supermarkets, 900 convenience stores, and 15 food warehouses. Its stores can be found throughout the US in more than half the states.

Kroger officials probably weren't totally shocked by the Haft bid. The company had already been restructuring its capital spending program in light of ``the high level of takeover and restructuring activity involving supermarket companies,'' says Lyle Everingham, chairman and chief executive officer of Kroger.