ShopKo Stores ( SKO) received an unsolicited buyout proposal from a group of investors, including hedge fund manager Elliott Management, offering to buy the Green Bay, Wis., retailer for $26.50 a share in cash. The offer is $1 above the $25.50-a-share deal ShopKo agreed to last week with Badger Retail Holding, an affiliate of Minneapolis-based private equity firm Goldner Hawn Johnson & Morrison. Elliott, which owns 6.6% of ShopKo's shares outstanding, has been critical of the company's attempts to strike a deal with Badger on the grounds that the initial takeover offer of $24 a share was too low. Another hedge fund that publicly criticized the ShopKo board was John A. Levin & Co. But in its announcement last week, ShopKo said Levin agreed to support the $25.50-a-share deal with Badger Retail, meaning Elliott was losing a strong partner in the bid to get a higher offer. Shares of ShopKo, a seller of general merchandise and pharmacy goods, closed Monday at $26.28, up 76 cents, or 3%. The stock has a 52-week range of $15.88 to $26.70. The other bidders in the new consortium along with Elliott are buyout shop Sun Capital Partners Group IV, Developers Diversified Realty ( DDR), an Ohio-based real estate investment trust, and Lubert-Adler Partners, a real estate investment firm. ShopKo issued a press release acknowledging that it received the $26.50 proposal, but the company said a special committee of its board continues to recommend the $25.50-a-share transaction with Badger. A 13-D filed Monday with the Securities and Exchange Commission contains a letter sent last week by Elliott Management to ShopKo's chairman, John Turner. In the letter, Elliott said that in addition to providing a premium to the agreed-upon bid, its group has a combined $15 billion in capital under management, which is enough to acquire ShopKo without external financing.