Whoopee with WEO

Charles G. Bluhdorn, the volatile financial wizard who put together the $1.67 billion-a-year Gulf & Western conglomerate, has a way of buying into companies that later turn out to be holding hidden assets. Evidently, Chairman Bluhdorn thinks that the Great Atlantic & Pacific Tea Co., the money-losing supermarket chain, has a few cookies on its shelves that no one else knows about. Last week G. & W. offered a minimum price to buy 3,750,000 shares of A. & P. stock--enough, when combined with the 1,046,000 that G.&W. already owns, to give it 19% of the stock.

G. & W. officers described the deal as merely "an investment," presumably meaning that they do not plan to try for full control of the $5.5 billion-a-year food colossus. Having watched the price of A. & P. stock drop from 30 to 16 7/8 over the past two years, Bluhdorn might be counting on the company's highly touted WEO (Where Economy Originates) discounting campaign to turn earnings around, after which he could sell off at a profit. Trouble is, while WHO has boosted A. & P.'s sales, it has so far savaged A. & P. earnings. The company lost more than $50 million in the first three quarters of fiscal '72 (compared with a $16 million profit in the equivalent period of '71) and skipped a quarterly dividend last month for the first time since 1925.

Still, A. & P. just might be an attractive merger target for a man of Bluhdorn's acquisitive instincts. A. & P. has lush cash assets ($78 million at last count), a credit line of $100 million and a huge real estate inventory--all of which the supremely confident Bluhdorn may think he can put to better use than the supermarket chain's stodgy management. A. & P.'s bosses were aghast, and Chairman William Kane promised to oppose vigorously Bluhdorn's tender offer.

Small investors, who own about one-third of A. & P.'s shares, could well decide to take Bluhdorn's offer of $20 per share, which was $3 more than the price that the stock was bringing at the time. The other major holders of A. & P. are the John A. Hartford Foundation and various members of the founding Hartford family. Trustees of the foundation will meet this week to decide their position. A. & P. Heir Huntington Hartford, who has sold most of his stock, did not think much of the Bluhdorn offer, saying that selling to G. & W. would be "like jumping from the frying pan into the fire." Meanwhile Wall Streeters reckoned that Bluhdorn had acted unwisely. Just after the offer was made, G. & W. stock fell from 30 3/8 to 28 1/2, and Merrill Lynch downgraded its recommendation on Gulf & Western from "buy" to "hold."

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