ShopKo Enters Merger With Goldner Hawn Johnson & Morrison

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ShopKo Stores announced today that it has signed a definitive merger agreement to be acquired by an affiliate of Minneapolis-based private equity investment firm Goldner Hawn Johnson & Morrison.

The transaction is valued at slightly more than $1 billion, which includes assumed debt of approximately $330 million.

Under the terms of the merger agreement, each outstanding share of ShopKo’s common stock will be converted into the right to receive $24.00 in cash. ShopKo currently has approximately 29.8 million shares of common stock outstanding, excluding options.

ShopKo’s current Chairman of the Board, Jack Eugster, has resigned his position as Chairman of the Board of Directors and his Board committee positions, effective immediately. John Turner and Steve Watson, both members of ShopKo’s Board of Directors, have been named as Co-Chairmen of the Board. Mr. Eugster will remain on the Board of Directors of ShopKo while the transaction is pending. ShopKo’s current President and Chief Executive Officer, Sam Duncan, has indicated that he will not remain with ShopKo following the transaction; however, other members of ShopKo’s senior management team are expected to remain in place and may invest in the company. Mr. Eugster will have an ongoing equity investment in ShopKo as part of the financing and after the merger becomes effective, Mr. Eugster is expected to serve as Chairman of the Board as well as acting Chief Executive Officer until a new President and Chief Executive Officer is named.

ShopKo’s Board of Directors approved the transaction based upon the unanimous recommendation of a Special Committee of disinterested and independent directors. Merrill Lynch & Co. served as financial advisor to the Special Committee and provided the Special Committee with a fairness opinion. Sidley Austin Brown & Wood LLP acted as legal advisor to the Special Committee and Godfrey & Kahn acted as legal advisor to the Board of Directors in connection with the transaction.

The transaction is expected to be completed in ShopKo’s second fiscal quarter of 2005. Commitment letters have been obtained for all necessary debt financing in connection with the transaction from Bank of America, ShopKo’s current principal lender, and Backbay Capital Funding LLC, an affiliate of Bank of America. The transaction is subject to approval by ShopKo’s shareholders, funding under the financing commitments, and other customary conditions, including regulatory approvals.

In connection with ShopKo’s solicitation of proxies with respect to the meeting of shareholders to be called with respect to the proposed merger, ShopKo will file with the Securities and Exchange Commission (the “SEC”), and will furnish to shareholders of ShopKo, a proxy statement. Shareholders are advised to read the proxy statement when it is finalized and distributed to shareholders because it will contain important information.

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ShopKo Enters Merger With Goldner Hawn Johnson & Morrison
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