-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Btf2mv6jvmO+CiJolRXGA6SR4RmixS5ypWJlJwP74QzafxydLmRXVUILqn++I01g 0TeBbOHRchZ6us8NETMWlA== 0000950142-05-002370.txt : 20050823 0000950142-05-002370.hdr.sgml : 20050823 20050823145759 ACCESSION NUMBER: 0000950142-05-002370 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20050823 DATE AS OF CHANGE: 20050823 GROUP MEMBERS: ALVARADO CAPITAL PARTNERS, L.P. GROUP MEMBERS: BKF CAPITAL GROUP, INC. GROUP MEMBERS: JOHN A. LEVIN & CO., INC. GROUP MEMBERS: LEVCO ALTERNATIVE FUND, LTD. GROUP MEMBERS: LEVCO GP, INC. GROUP MEMBERS: PURCHASE ASSOCIATES II, L.P. GROUP MEMBERS: PURCHASE ASSOCIATES, L.P. FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LEVIN JOHN A & CO INC /NY/ CENTRAL INDEX KEY: 0000811349 IRS NUMBER: 133134273 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: ONE ROCKFELLER PLZ 25TH FL CITY: NEW YORK STATE: NY ZIP: 10020 MAIL ADDRESS: STREET 1: ONE ROCKEFELLER PLZ CITY: NEW YORK STATE: NY ZIP: 10020 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SHOPKO STORES INC CENTRAL INDEX KEY: 0000878314 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 410985054 STATE OF INCORPORATION: WI FISCAL YEAR END: 0222 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-41879 FILM NUMBER: 051043523 BUSINESS ADDRESS: STREET 1: 700 PILGRIM WAY CITY: GREEN BAY STATE: WI ZIP: 54304 BUSINESS PHONE: 9204972211 MAIL ADDRESS: STREET 1: PO BOX 19060 CITY: GREEN BAY STATE: WI ZIP: 54307-9060 SC 13D/A 1 sc13da1_shopko.txt AMENDMENT NO. 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D/A Under the Securities Exchange Act of 1934 (AMENDMENT NO. 1 )* SHOPKO STORES, INC. ------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $0.01 SHARE ----------------------------------- (Title of Class of Securities) 824911101 -------------- (CUSIP Number) NORRIS NISSIM, ESQ. JOHN A. LEVIN & CO., INC. ONE ROCKEFELLER PLAZA NEW YORK, NEW YORK 10020 TEL. NO.: (212) 332-8400 -------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) with a copy to JOHN C. KENNEDY, ESQ. PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019-6064 AUGUST 23, 2005 --------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject to this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box .. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes.) ================================================================================ CUSIP NO. 824911101 SCHEDULE 13D PAGE 2 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Levco Alternative Fund, Ltd. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Cayman Islands - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,521,800 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 1,521,800 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,521,800 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 3 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Purchase Associates, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 93,400 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 93,400 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 93,400 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.3% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 4 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Purchase Associates II, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 129,000 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 129,000 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 129,000 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 5 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Alvarado Capital Partners, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 12,000 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 12,000 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 12,000 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) less than 0.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 6 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Levco GP, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Cayman Islands - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 234,000 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 234,000 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 234,400 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.7% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 7 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON John A. Levin & Co., Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,818,400 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 1,818,400 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,818,400 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IA - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 8 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON BKF Capital Group, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,818,400 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 1,818,400 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,818,400 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 9 OF 11 Pursuant to Rule 13d-2(a) of Regulation 13D-G of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Act"), the undersigned hereby amend their Schedule 13D Statement, dated July 14, 2005 (the "Schedule 13D") relating to the common stock, par value $.01 per share (the "Common Stock"), of ShopKo Stores, Inc., a Wisconsin corporation (the "Company"). This Amendment No. 1 to the Schedule 13D is being filed on behalf of each of the following persons (each a "Reporting Person" and collectively, the "Reporting Persons"): (i) Levco Alternative Fund, Ltd., a Cayman Islands company ("Levco"), (ii) Purchase Associates, L.P., a Delaware limited partnership ("Purchase"), (iii) Purchase Associates II, L.P., a Delaware limited partnership ("Purchase II"), (iv) Alvarado Capital Partners, L.P., a Delaware limited partnership ("Alvarado"), (v) Levco GP, Inc., a Delaware corporation ("Levco GP"), (vi) John A. Levin & Co., Inc., a Delaware corporation ("Levin & Co.") and (vii) BKF Capital Group, Inc., a Delaware corporation ("BKF"). Item 1. SECURITY AND ISSUER. No material change. Item 2. IDENTITY AND BACKGROUND. No material change. Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. No material change Item 4. PURPOSE OF TRANSACTION. This Item 4 is hereby amended by adding the following: "The Reporting Persons have attached as Exhibit 4 to this Schedule 13D a letter, dated August 23, 2005, from Purchase Associates LP, Levco Alternative Fund, Ltd. and certain related entities to the special committee of the Board of Directors of the Issuer which details additional concerns regarding the Merger and reaffirms their intention to vote against the Merger at the stockholders' meeting to be held on September 14, 2005." Item 5. INTEREST IN SECURITIES OF THE ISSUER. No material change. Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Not applicable. Item 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 3: Joint Filing Agreement, dated August 23, 2005, among the Reporting Persons. Exhibit 4: Letter, dated August 23, 2005. CUSIP NO. 824911101 SCHEDULE 13D PAGE 10 OF 11 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: August 23, 2005 LEVCO ALTERNATIVE FUND, LTD. By: John A. Levin & Co., Inc., its investment adviser By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel PURCHASE ASSOCIATES L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel PURCHASE ASSOCIATES II, L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel ALVARADO CAPITAL PARTNERS, L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel CUSIP NO. 824911101 SCHEDULE 13D PAGE 11 OF 11 LEVCO GP, INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel JOHN A. LEVIN & CO., INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel BKF CAPITAL GROUP, INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel EX-1 2 ex-3sc13da1_shopko.txt EXHIBIT 3 EXHIBIT 3 --------- JOINT FILING AGREEMENT Each of the undersigned hereby acknowledges and agrees, in compliance with the provisions of Rule 13d-1(k)(1) promulgated under the Securities Exchange Act of 1934, as amended, that the Schedule 13D to which this Agreement is attached as an Exhibit (the "Schedule 13D"), and any amendments thereto, will be filed with the Securities and Exchange Commission jointly on behalf of the undersigned. This Agreement may be executed in one or more counterparts. Dated: August 23, 2005 LEVCO ALTERNATIVE FUND, LTD. By: John A. Levin & Co., Inc., its investment adviser By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel PURCHASE ASSOCIATES L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel PURCHASE ASSOCIATES II, L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel ALVARADO CAPITAL PARTNERS, L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel LEVCO GP, INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel JOHN A. LEVIN & CO., INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel BKF CAPITAL GROUP, INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel EX-99 3 ex-4sc13da1_shopko.txt EXHIBIT 4 EXHIBIT 4 --------- JOHN A. LEVIN & CO., INC. ONE ROCKEFELLER PLAZA 25TH FLOOR NEW YORK, NY 10020 (212) 332-8400 August 23, 2005 Members of the Special Committee of the Board of Directors c/o ShopKo Stores, Inc. 700 Pilgrim Way Green Bay, Wisconsin 54304 Dear Members of the Special Committee: We have reviewed your response letter to us of August 1 as well as the definitive proxy statement and Schedule 13E-3 filing relating to the pending sale of the Company and the Company's August 18th earnings release. In response we wish to make the following points: (1) Most importantly, we remain opposed to the Goldner Hawn transaction as $23 of the $24 consideration would be funded by debt borrowed largely against shareholders own real estate assets, which we believe demonstrates that the value of the Company clearly exceeds $24 per share. (2) It appears that the Company's net debt has decreased from $296 million to $241 million(1) in just the last few months, seemingly reducing the cash needed by Goldner Hawn to consummate its acquisition of the Company by $55 million. In light of the fact that the Goldner Hawn transaction contemplates a mere $30 million of equity, this would appear to not only negate the need for any equity contribution by Goldner Hawn and Jack Eugster, but even potentially allow Goldner Hawn and Jack Eugster to pay themselves a $25 million cash dividend upon closing. This only further underscores what we believe to be the grossly inadequate price for which the Special Committee has agreed to permit the sale of the Company to a group that includes the Company's former Chairman of the Board. (3) It also appears to us, based on a comparison of the April 2nd presentation made to the Special Committee by its financial advisor and the Company's definitive proxy statement, that the transaction fees associated with the pending sale transaction have declined from an initial estimate of $116 million(2) to $90 million(3). This $26 million savings, on top of the reduction of $55 million in net debt, represents $81 million less cash needed against what is a planned equity contribution of just $30 million. Why doesn't the Special Committee believe these reductions in net debt and deal cost savings should benefit the Company's stockholders? Furthermore, we would like to know if any portion of the $90 million in deal fees is being paid to Goldner Hawn in its capacity as the sponsor of the pending transaction. (4) We note that in the Company's August 18th earnings release it was indicated that capital expenditures for fiscal 2005 are now estimated at $35 million. This is a reduction of $32 million when compared to management's March 2005 projection of $67 million(4). This reduction will effectively double the estimate of the Company's free cash flow utilized by the Special Committee's own financial advisors. Based on just the three factors outlined above, we question how the Special Committee can continue to conclude that the sale of the Company at a price of $24 per share to Goldner Hawn and Jack Eugster is in the best interests of the Company's shareholders. (5) We disagree with the counsel your financial advisors have provided you; specifically, that a recapitalized ShopKo would have resulted in lower shareholder value. They conclude that leveraging the Company would have caused the Company to have a zero or negative equity valuation under several of their scenarios. They arrive at this valuation by assigning a multiple of EBITDA to the Company and concluding that the resulting value would not have exceeded the debt load on the levered recapitalized company. However, even their own analysis shows that a recapitalized Company would still generate significant free cash flow over the next five years -- at least $29 million(5) per year (twice that amount if capital expenditures are kept to the 2005 levels estimated by the Company in its August 18th earnings release). We are at a loss to understand how a recapitalized Company that generates free cash flow can have a negative valuation. (6) We see no reason why many of the risks associated with a recapitalization which you cite to justify a sale instead of a recapitalization would apply to a levered public company any more than to a levered private company. In particular, we believe: o A similarly capitalized public and private company should have few or no differences in the way they negotiate with vendors. o The execution risks for public and private companies with similar debt loads should not be materially different. o Both a private and public company would have similar debt refinancing risks. o A public company should not be at a disadvantage to a private company for the design and implementation of competitive management compensation arrangements. (7) We wish to note that our previous letter to you was not a recapitalization proposal (nor meant to suggest that a special dividend of exactly $23 per share would have necessarily achieved the greatest achievable shareholder value). It was simply meant to illustrate what we believe are the inadequate economics of the Goldner Hawn transaction and to demonstrate one of many alternative scenarios that should have been considered by the Board. Although a recapitalization entails risk, it is our firm belief that a leveraged recapitalization, even with a special dividend of less than $23 per share, would have been likely to deliver value to the Company's stockholders in excess of the $24 per share that will be received by Company stockholders if the pending sale of the Company is permitted to be consummated. (8) Finally, we call on the Company to make public the results of the appraisal of its real estate so that shareholders are able to vote on the Goldner Hawn transaction on a fully informed basis. We are left to only wonder why the Company has not elected to do so, but is rather keeping this information from its own shareowners. Unfortunately, we remain unable to support the proposed sale of the company to Goldner Hawn and Jack Eugster and intend to vote against it at the September 14 meeting of stockholders. We hope that the Special Committee and the Board will take our concerns into account, and that you recognize the value of ShopKo as much as we do. Sincerely, /s/ Jonathan Reiss /s/ Rosty Raykov - ------------------------- -------------------------- Jonathan Reiss Rosty Raykov Portfolio Manager Portfolio Manager - ---------- (1) From ShopKo 2Q05 earnings press release on August 18, 2005, compared to Balance Sheet, ShopKo F1Q05 10-Q. (2) From page 29, GHJM Proposed Structure-Use of Funds, of the Merrill Lynch Discussion Materials to the Special Committee on April 2, 2005. (3) From page 75 of the Definitive Proxy, Estimated Fees and Expenses of the Merger, filed on August 9, 2005. (4) From page 87 of the Definitive Proxy, March 2005 Projections-Base Case, filed on August 9, 2005. (5) From page 2 of Discussion Materials prepared by Merrill Lynch, Amendment No. 2, Schedule 13E-3, filed on August 3, 2005. -----END PRIVACY-ENHANCED MESSAGE-----