ESL Hedge Fund Pares AutoZone Stake

ESL Investments is selling 5.6 million shares in AutoZone(AZO Quote) in a $550 million public offering underwritten by Citigroup Global Markets.

The $5 billion hedge fund will still have more than 19 million shares in the Memphis, Tenn., company.

A unit of the hedge fund run by Edward S. Lampert bought the shares in an April 2002 shelf registration deal, a statement from AutoZone said. AutoZone was at $66.44 at the beginning of April 2002 and it closed the month at $76. IT began trading today down 5.1% from its Thursday close at $103.53.

A Citigroup unit is also buying an over-the-counter option for 4.4 million shares of AutoZone common stock at an exercise price of $100 a share, effective Dec. 19. The affiliate will initially offer 1.8 million and will follow with other transactions before the option expires.

ESL will hold the remainder of its AutoZone common stock for the next 90 days. In a statement, Lampert, best known for negotiating his own release from a quartet of kidnappers in Janaury, said ESL remained confident of AutoZone chief executive Steve Odland's leadership.

ESL, an activist value fund whose investors include the Ziff family, David Geffen, Michael Dell and Thomas Tisch, owns 10% or more of Autonation(AN Quote), ANC Rent (symbol Quote), Deluxe Corp. (DLX Quote), Footstar(FTS Quote), Payless(PSS Quote) and Sears(S Quote). It owns 49% of Kmart(KMRT Quote).