09/16/96 GIANT FOOD: GOOD ENOUGH TO EAT?

GIANT FOOD: GOOD ENOUGH TO EAT?

Big investors have been adding shares of Giant Food (GFSA) to their shopping carts. In part, they're taking a cue from British food retailer J. Sainsbury, which recently increased its stake from 17% to 20% of Giant's Class A shares. Sainsbury already owns 50% of Giant's voting stock. The buzz is that before long the British grocer will opt to buy the entire company. The stock sells at 33 7/8 and is up about 8% so far this year.
One ardent Giant fan is investor Mario Gabelli, who continues to add to his nearly 5% stake. Gabelli's associates insist he owns the stock because of the value he sees in the business and not because of a possible takeover. Giant operates 166 supermarkets, mainly food-and-drug combinations in Washington and Baltimore. Giant rang up sales of $3.8 billion last year, and analysts expect revenues to hit $4 billion this year and $4.3 billion in 1997. Giant, it is projected, will earn $1.65 a share this year and $2 next year.
Some pros see Giant bought out for around 40 a share--provided that Sainbury buys the shares it doesn't already own. ``Given the improving supermarket sales and earnings, plus the takeover kicker, the stock is an opportunity where the downside risk seems rather low,'' says one New York investment banker. He adds that as the price continues to creep up, the momentum players and hot-money players will jump in before a deal comes. From the way Sainsbury has been buying up shares, ``it becomes more obvious that the British firm has clearly defined plans for a takeover,'' he says. A spokesman for Giant Foods declined comment on the potential for a takeover.

BY GENE G. MARCIAL