The Shopping-Cart Raiders

By Janice Castro

Tooling around Washington in his black stretch limousine and sporting a snow- white pompadour, Herbert Haft, 68, may look more like a Hollywood agent than a predator who strikes terror in the hearts of corporate executives. But the roster of giant retailers -- including the May department stores, Dayton Hudson and Safeway -- shaken up by his Dart Group (1987 revenues: $406 million), based in Landover, Md., has earned Haft and his eldest son Robert, 35, Dart's president, a reputation as two of the most feared raiders on the roiling retail scene. Just ask the 2,257-store Kroger grocery chain.

Four days after the Hafts offered to buy the Cincinnati-based company (1987 revenues: $17.7 billion) two weeks ago, Kroger's board approved a sweeping $4.6 billion restructuring plan. Spurning the $4.4 billion Haft bid, as well as a follow-up $4.6 billion offer from Kohlberg Kravis Roberts, a New York City investment firm, Kroger's management proposed to sell off dozens of properties, slash costs and offer its stockholders cash and bonds worth up to $60 a share. Says Kroger CEO Lyle Everingham: "The company is not for sale."

Even so, the Hafts may come out ahead. In three years they have reaped some $200 million in profits on six failed takeovers -- more than most raiders make by capturing their prey. In most cases, the Hafts quietly bought up a chunk of the target's shares, then sold at a premium after takeover frenzy drove up the price.

A onetime Washington pharmacist, Herbert Haft started the Dart discount- drugstore chain in 1952 and built it into a 74-store firm with annual revenues of $283 million. So expert was he at keeping costs (and, some say, service) to a minimum that after he sold the chain to its operating managers in 1984 for $160 million, the new owners took out newspaper ads to inform customers that the stores were no longer owned by the Hafts.

Flush with cash, Haft raised $250 million more in junk-bond financing for his Dart Group, which owns 262 Trak Auto and 212 Crown Books shops. Within a year, Dart mounted unsuccessful takeover campaigns for the May department stores, the Jack Eckerd drugstore chain and Beatrice. Profits on those raids: $13.2 million. The Hafts' biggest score came in October 1986, when the Safeway company paid Dart $59 million to go away, so that the chain's management could execute a $4.1 billion leveraged buyout of the firm. Dart's total take at the Safeway checkout stand: $137 million. Six months later, the Hafts cleared $32 million more after an assault on Supermarkets General.

A fierce battle for $10.6 billion Dayton Hudson last fall fizzled when the stock market crashed. Like other raiders caught in the middle of takeover attempts, the Hafts took heavy losses ($104 million), selling off their Dayton Hudson shares at a sharply lower price. But they were on the trail again by January, closing in on Stop & Shop. Kohlberg Kravis Roberts stepped in, as it had with Safeway, to help engineer a leveraged buyout, but the Hafts made $17 million dumping their stock as the price rose. Wall Street wags joked that Kohlberg should pay Dart a finder's fee for clients.

Are the Hafts serious about takeovers? Says Eliot Benson, research director for the Washington investment firm Ferris & Co.: "They tell us that they want to run a major enterprise, but what do we know? All we know is that they invariably make a profit." As long as they do, the Hafts may never bag a mammoth firm. They are having too much fun milking the ones that get away.

With reporting by Rafael Alvarez/Baltimore and Jeannie Ralston/New York