Lund heiress says she wants to free her inheritance to use for philanthropy

A Lund family heiress said she is fighting in court to cash out her 25 percent stake in the family's supermarket empire largely so she can give the money away.

Kim Lund, 57, took the stand Wednesday in her lawsuit against Lunds Inc. and her brother, Russell "Tres" Lund III, longtime CEO of the chain that now goes by the moniker Lunds & Byerlys. Hennepin County Chief Judge Ivy Bernhardson has already ruled that Lunds must purchase Kim's interest, but a canyon divides the two sides on the purchase price.

Kim Lund's financial experts say her stake is valued at $80.4 million; Lunds says it is worth just over $21 million. Bernhardson will determine the actual buyout price after the trial concludes.

Kim Lund told the court that once the ruling is made, she and her two children will decide how much money they need, and "the rest will be given back to the community."

Lund, a teacher for 30 years, said philanthropy has long been a "part-time job" for her, and wants to take it further. "That's what I want to do with my inheritance."

She said she and her children have more money "than they will ever need." Kim's son, Benjamin Lund, 25, and her daughter, Ani Lund, 22, testified in favor of their mother's efforts Wednesday. Kim said she would accept the buyout over a multi-year period, court records show.

Tres Lund effectively argues that the grocery chain cannot sustain a large payout and still remain independent and relevant in an increasingly competitive grocery market. The company claims it would have to borrow $76 million to fund a buyout at the price Kim has demanded.

That debt "is not going to grow the top line or bottom line of the company," but will saddle Lunds with interest payments, he told the court. "It will curtail our ability to invest in our stores."

Tres and Kim Lund's grandfather, Russell Lund Sr., founded Lunds in 1939 with a single store on Lake Street in Minneapolis. After their grandfather and their father, Russell Lund Jr., both died in 1992, Tres and Kim Lund and their two siblings each got 25 percent of the company.

Kim Lund has tried on and off for years to cash out her stake in Lunds Inc. Finally, in late 2014 she sued the company to free her inheritance, as well as to remove Tres Lund as a trustee of the trusts holding much of her stock.

The suit has broken relations with her siblings, Kim testified. "My family has shunned me and my kids. We are excluded from all family events." Her brother, Robert, and sister Shauna support Tres, she said. "It is win at all costs."

The stakes are high. Tres doesn't want to relinquish any family control of the company by selling Kim's stake off to an outside buyer, or raising cash through some other alternative to debt. Yet, the company seems to abhor long-term debt, too; it has none on its balance sheet. "We've been very conservatively run from a financial perspective," Tres testified.

Indeed, while Lunds has a $35 million bank line of credit, it still manages to finance store remodelings and other major investments through its cash flow, he said. And in recent years, Lunds has sunk millions into buying new properties and remodeling them, and renovating existing outlets to keep up with growing competition.

Tres was 30 years old when he took over as CEO in the early 1990s. He engineered a big deal in 1997, buying Twin Cities rival Byerly's, which had 11 supermarkets — three more than Lunds had at the time. Today, there are 26 Lunds & Byerlys stores, catering to an upscale niche.

The chain's Twin Cities market share has been growing — up to 10 percent these days, by one account. And Lunds is solidly profitable with annual revenue of about $660 million, court records said.

Tres Lund said on Wednesday that from 2000 to 2010, the local market — long dominated by union grocers and particularly Cub and Rainbow — was turned on its head by growth of SuperTarget, Wal-Mart, Aldi, Whole Foods and Trader Joe's. The market share held by unionized employers — including Lunds & Byerlys — fell from more than 80 percent in 2000 to 50 percent by 2010, he testified.

It has fallen further since. In 2014, Rainbow buckled under the competition, essentially folding. The same year, Des Moines-based Hy-Vee announced a huge play for the Twin Cities market. It has opened five stores already, and at least three more are on tap for this year.

One of those new Hy-Vees — the one at Pilot Knob and Yankee Doodle Road in Eagan — is near a Lunds & Byerlys. Lunds figured that when the Eagan Hy-Vee opened, it would cut weekly sales at its nearby store by about $125,000 per week, Tres Lund testified. Lunds had enough lead time to go on the offensive, renovating its store before Hy-Vee arrived.

The effort helped: The Eagan store lost only $60,000 in weekly sales after the new Hy-Vee opened, Lund said.

Mike Hughlett • 612-673-7003