The Minneapolis Star from Minneapolis, Minnesota • Page 19

the minneapolis star tuesday, january 31, 1978 5B Butler Square sold to group of investors PROPOSED DAYTON'S ACQUISITION Mervyn's climbs up from obscurity iB MERVIN MORRIS WILLIAM ANDRES By JOE BLADE Minneapolis Star Staff Writer The Butler Square Building in downtown Minnea lis was sold last month to a group of investors hea by James Binger, chairman of the executive comr tee of Honeyweil it was revealed yesterday. The refurbished, nine-story warehouse at 100 N. St. had been owned by the First National Bank of Paul since January 1976. The bank foreclosed after developer, Charles Coyer, was unable to repay ab $5 million of a construction loan.

The purchase price was not announced. Nor the names of Binger's partners. No changes in polic or procedures are planned, says a letter to the bui ing's tenants. The sale included the building's park; lot at the northeast coi ner of 6th St. and 1st Av.

N. Charles F. Hall Associates Inc. will become le ing and managing agent of Butler Square, as it was a time under Cover's ownership. Occupancy of the building creased to 78 percent from about 40 percent in the months the building has been managed by Coldw Banker, according to the letter sent to tenants.

Kenneth Sandstad, Coldwell Banker's Twin Cit. sales manager, said occupancy should jump in the ne future. A number of prospective tenants are interest in space, Sandstad said, and the vacancy rate is ve low in "quality buildings" downtown. The Butler Building was built in 1906. After its as a warehouse was past, it was in danger of demoi tion.

It was designated a historic building and save, by Coyer's award-winning remodeling. The center of the building was cut away in an irreg ular pattern to create an atrium. The building's thici wooden beams and brick walls were retained, wit) glass walls looking onto the atrium. Butler Square was opened for tenants in the summer of 1974. But its prospects were damaged by th" recession of 1974-75, which cut down real-estate pre jects across the country.

Plans were shelved to develop the unretouched rea half of the building as a hotel. There was no indication given yesterday of what plans the new owners migli have for that 250,000 square feet of space. For all those apparent reasons, Dayton Hudson has agreed to pay a hefty premium for Mervyn's. The stock the Minneapolis concern proposes to issue would be worth about $81 million more than the market value of Mervyn's stock, based on prices just before last week's announcement. The premium is based on the announced exchange rate of eight-tenths of a share of Dayton Hudson common for each of Mervyn's 9.5 million outstanding shares.

That stiff bonus plus the fact that the deal would dilute Dayton Hudson's earnings per-share caused Dayton Hudson stock to drop 87.5 cents a share, to $37,375, the day of the announcement, while Mervyn's stock jumped $3.25 a share, to $26.25. A DAYTON HUDSON spokesman said yesterday that the Wall Street reaction "didn't really surprise" his company. Dayton Hudson finished trading on the New York Stock Exchange at $37 a share yesterday; Mervyn's, which is traded over-the-counter, closed on a bid of $25,875. The apparent individual big winner in the proposed merger would be Mervin Morris, chairman and chief executive officer, who started Mervyn's with a net worth of $25,000 in 1949 and presided over its recent expansion through the Bay Area suburbs and into Nevada and southern California. Morris and his family hold about 3.3 million Mervyn's shares, or about 35 percent of the total outstanding.

At pre-merger-announcment prices, the market value of those holdings would rise by about $29 million under terms of the proposed exchange. After the exchange, the Morris family would hold about 2.6 million Dayton Hudson shares, making it second in shareholding size only to the Dayton family. That family, which founded the Dayton Corp. that merged in 1969 with Detroit-based Hudson's, owned about 7 million Dayton Hudson shares or 42.5 percent of the total outstanding as of last year's annual meeting. A merger also would make Morris a Dayton Hudson director and would bring him and the other Mervyn's shareholders the added benefit of Dayton Hudson dividends which currently are being paid at an annual rate of $1.40 a share.

Mervyn's hasn't paid dividends, as its profits have been plowed back into its rapid growth. The merger would make Mervyn's Dayton Hudson's third-largest division, based on sales for the first nine months of fiscal 1977. Mervyn's $237 million in sales for the period would place it behind Target and Hudson's, which had sales of $480 million and $380 million respectively, and ahead of Dayton's, whose nine-month sales came to $215 By JOHN GREENWALD The Star's Buiineas Editor Mervyn's that's its full corporate name wasn't exactly a household word here when Dayton Hudson Corp. announced plans last week to buy it for a whopping $290 million worth of stock in a deal that would be the largest in Dayton Hudson's history- Mervyn's wasn't even a household name in its native northern California until about six years ago, when its formula for suburban family clothing and soft-goods retailing began winning notice. Before then, notes the chain's latest annual report, "Mervyn's was recognized by a limited number of people as a retailer establishing a profitable niche in the San Francisco Bay area.

"By 1974, its growth throughout northern California brought increasing attention," said the report, which was issued for fiscal 1976. "But 1976 saw Mervyn's acknowledged as an important force in western retailing by industry and customers as well a decided impact in 2 million California and Nevada homes each week." AT THE END of that year, Hayward-based Mervyn's had 33 stores in California and two in Nevada. Its 1976 profit from those stores was $8.6 million up 20.1 percent on sales of $262.6 million, a gain in that category of 35.3 percent. As of last week's preliminary merger announcement, Mervyn's had opened seven more California stores three of them in southern California bringing its total to 42. The firm's sales for the nine months ended Oct.

30, 1977, were $236.2 million, up 45 percent, while profits for the period came to $9.2 million, up 76 percent. A key to that growth has been Mervyn's specialization as a "soft goods" retailer whose wares consist mostly of clothing, with such items as fabrics, linens and toys thrown in. About 85 percent of Mervyn's sales are of what the firm calls "clothing for the entire family," with the rest accounted for by the nonclothing lines. In its merchandising approach, Mervyn's noted in a brochure, the company "positions itself between the traditional department stores and the national chains." That means Mervyn's has staked out a niche between such "traditional" stores as Macy's, May Co. and Broadway on the one hand, and such national chains as Sears, Penney's and Ward's on the other.

It has done this, the brochure said, "by offering both the nationally branded merchandise at regular prices offered by department stores, as well as the types of private label merchandise typically sold by national chains "THUS, THE MERVYN'S customer has the choice under one roof of merchandise at price ternatlves unobtainable at other stores," the brochure asserted. "The mix of national brand mer-chanise and private labels, including Mervyn's own label, is unique and is a cornerstone of Mervyn's merchandising philsophy." That philosophy has helped Mervyn's become the industry leader in such performance categories as sales and profit growth and return on capital and stockholders' equity, according to one survey. Dayton Hudson, meanwhile, is preparing a prospectus in connection with the 7.6 million shares of stock it intends to issue in exchange for Mervyn's. The Minneapolis-based company has thus kept quiet about its motives for the deal, which would move It up a notch to seventh place among the nation's largest retailing concerns, ahead of St. Louis-based May Co.

But in an interview last summer, William Andres, Dayton Hudson president and chief executive officer, noted, "We don't need to merge for growth." What his firm's corporate talent scouts are looking for, Andres said, are "acquisitions that fit with our corporate philosophy." ACQUIRED FIRMS "must do something for the customer" and "must add something to our operation," Andres said. That last means that new companies must bring new capabilities to the diversified retailer, whose sales for the first nine months of 1977 came to $1.4 billion, up 13.6 percent. In Mervyn's case, those capabilities would appear to be the chain's specialization and philosophy, its unusual growth and its grip on California markets. Dayton Hudson now is represented in California only through its book and jewelry subsidiaries. "If they wanted to buy into California, this was practically their last chance," said an observor there.

"There's just about nothing else left." CORRECTION The Minneapolis Star Friday incorrectly identified Richard Gold as publisher of "American Jewist: World." Gold is a partner in the publishing enterprise His brother, Norman Gold, is publisher. (in vi'ren ment)n. The surrounding physical, social, and cultural conditions that influence the life of an individual or a community. HP nn JT But most of all, we are proud of our scenic, peaceful setting. We serve an ever-growing urban and suburban population from our campus in Golden Valley, affording convenient access from a wide geographic area.

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