A&P-Pathmark deal: 'Marriage made in heaven'?
Sunday, April 1 2007
Published on AllBusiness.com
The Great Atlantic & Pacific Tea Co., Inc., based in Montvale, N.J., confirmed at a press conference last month that it would buy Carteret, N.J.-based Pathmark Stores for $1.3 billion in cash, stock, and debt assumption or retirement, in a transaction expected to close during the second half of A&P's fiscal 2007 year.
A&P president and c.e.o. Eric Claus referred to the combination of the two well-known Northeast retailers as "a marriage...made in heaven."
Burt Flickinger III, managing director of New York-based Strategic Resource group, shared similar comments when he spoke to Progressive Grocer prior to the announcement of the official acquisition. He referred to it as "a perfect complementary combination," noting Pathmark's solid success in urban markets, as opposed to its overall weaker performance in the suburbs, and A&P's emphasis on rolling out fresh formats in suburban areas, thereby shifting share from Pathmark and others. The effect of the acquisition would be to take "two good operations, between urban and suburban, and make them even better," according to Flickinger.
Flickinger also noted that both grocers have outsourced warehousing and transportation to Keene, N.H.-based C&S Wholesale Grocers, and that both Pathmark and A&P suffer from "particularly high" levels of out-of-stocks that don't seem to be an issue at other area food retailers.
An acquisition might allow the companies to work more effectively on the out-of-stocks problem, said Flickinger, by their being able to invest in better computer systems, consolidate distribution systems, align trucking schedules, and draw on sufficient working capital and inventory.
Flickinger also reasoned that the acquisition's ultimate success would depend on who would be installed at the top of a new combined organization. The retention of such key executives as A&P president and c.e.o. Eric Claus, as well as Pathmark president and c.e.o. John Standley and co-president Ken Martindale, who've both done "a terrific job helping Pathmark make progress" after a decade of struggle, would be key, he said.
A&P has said that executive chairman Christian Haub will retain the position of executive chairman at the combined company, while Claus will continue as president and c.e.o. A Pathmark spokesman told PG that Standley's future role at the combined company was not yet known, however.
The purchase, subject to completion of shareholder and regulatory approvals as well as other customary closing conditions, is expected by officials from both companies to create a 550-store, $11 billion supermarket chain with an imposing presence in the New York, New Jersey, and Philadelphia metro areas, along with stores in the Baltimore/Washington D.C.,
A&P president and c.e.o. Eric Claus referred to the combination of the two well-known Northeast retailers as "a marriage...made in heaven."
Burt Flickinger III, managing director of New York-based Strategic Resource group, shared similar comments when he spoke to Progressive Grocer prior to the announcement of the official acquisition. He referred to it as "a perfect complementary combination," noting Pathmark's solid success in urban markets, as opposed to its overall weaker performance in the suburbs, and A&P's emphasis on rolling out fresh formats in suburban areas, thereby shifting share from Pathmark and others. The effect of the acquisition would be to take "two good operations, between urban and suburban, and make them even better," according to Flickinger.
Flickinger also noted that both grocers have outsourced warehousing and transportation to Keene, N.H.-based C&S Wholesale Grocers, and that both Pathmark and A&P suffer from "particularly high" levels of out-of-stocks that don't seem to be an issue at other area food retailers.
An acquisition might allow the companies to work more effectively on the out-of-stocks problem, said Flickinger, by their being able to invest in better computer systems, consolidate distribution systems, align trucking schedules, and draw on sufficient working capital and inventory.
Flickinger also reasoned that the acquisition's ultimate success would depend on who would be installed at the top of a new combined organization. The retention of such key executives as A&P president and c.e.o. Eric Claus, as well as Pathmark president and c.e.o. John Standley and co-president Ken Martindale, who've both done "a terrific job helping Pathmark make progress" after a decade of struggle, would be key, he said.
A&P has said that executive chairman Christian Haub will retain the position of executive chairman at the combined company, while Claus will continue as president and c.e.o. A Pathmark spokesman told PG that Standley's future role at the combined company was not yet known, however.
The purchase, subject to completion of shareholder and regulatory approvals as well as other customary closing conditions, is expected by officials from both companies to create a 550-store, $11 billion supermarket chain with an imposing presence in the New York, New Jersey, and Philadelphia metro areas, along with stores in the Baltimore/Washington D.C.,