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    Sun Cap Affiliate to Buy ShopKo

    GREEN BAY, Wis. -- ShopKo Stores, Inc. will be acquired by an affiliate of Sun Capital Partners, Inc. for $29 per share. The deal also includes an increase in the per share price of 6 percent per annum each day beginning on Dec. 15, 2005, and ending on the closing date of the transaction.

    GREEN BAY, Wis. -- ShopKo Stores, Inc. will be acquired by an affiliate of Sun Capital Partners, Inc. for $29 per share. The deal also includes an increase in the per share price of 6 percent per annum each day beginning on Dec. 15, 2005, and ending on the closing date of the transaction.

    Immediately prior to signing the merger agreement with the Sun Capital affiliate, ShopKo terminated a merger agreement between it and Badger Retail Holding, Inc., an affiliate of Goldner Hawn Johnson & Morrison Inc.

    ShopKo's board delivered the notice of termination of the prior merger agreement to the GHJM affiliate, along with the payment of the $13.5 million break-up fee required by that agreement. In addition, the board has canceled the special meeting of shareholders scheduled for Oct. 26, 2005 to consider the merger agreement with the GHJM affiliate.

    In a statement, Gary Talarico, managing director of Sun Capital Partners, Inc., said: "We are very pleased to have executed the definitive merger agreement with ShopKo Stores and look forward to closing the transaction as quickly as possible. As one of the most active private investment firms in the retail sector, we are enthusiastic about ShopKo joining our family of leading retailers and we look forward to working with the management team and employees of the company to continue to deliver excellent value to the customers and communities that ShopKo serves."

    The transaction with the Sun Capital affiliate is expected to be completed December or January, which both fall in ShopKo's fourth fiscal quarter. It is subject to approval by ShopKo's shareholders and certain other conditions, including regulatory approvals. The transaction is not subject to a financing condition. Commitment letters have been obtained for all necessary debt financing in connection with the transaction from Wachovia Bank, National Association, Wachovia Capital Markets LLC and Ableco Finance LLC and an equity commitment letter has been delivered by Sun Capital Partners IV, LP.

    With stores located throughout the Midwest, Mountain and Pacific Northwest regions, ShopKo's retail formats include 137 namesake stores providing name-brand merchandise, pharmacy and optical services in mid-sized to larger cities; 218 Pamida stores, 116 of which contain pharmacies; and three ShopKo Express Rx stores, a new neighborhood drugstore concept. With more than $3 billion in annual sales, ShopKo Stores, Inc. is listed on the New York Stock Exchange under the symbol SKO.

    ShopKo's board of directors approved the transaction based upon the unanimous recommendation of the special committee of disinterested and independent directors, for which Merrill Lynch & Co. served as financial advisors. In connection with the transaction, Sidley Austin Brown & Wood LLP acted as legal advisor to the special committee, Godfrey & Kahn, S.C. acted as legal advisor to the board, and Morgan, Lewis & Bockius LLP served as counsel to the Sun Capital affiliate.

    Sun Capital Partners, Inc. is a private investment firm focused on leveraged buyouts and investments in market-leading companies that can benefit from its in-house operating experience and expertise. The company runs offices in Boca Raton, Los Angeles, New York, and London and has more than $2.5 billion of equity capital under management.

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