A&P Stock Rises on News of Sale

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A&P stock rises on news of sale

May 11, 2005

The Great Atlantic & Pacific Tea Co., the owner of A&P supermarkets, hired JPMorgan Chase & Co. to find a buyer for its Canadian grocery-store business, a sale that could raise more than $1 billion.

This announcement, combined with its latest financial results and a planned major restructuring, led to sharply higher stock prices the week of May 9-13.

A&P plans to sell A&P Canada, divest itself of its Midwest operations, and concentrate on its core operations in the broad corridor from Connecticut to Washington, DC.

Christian Haub, chairman of the board and chief executive officer, said, "The strategic, operational and financial steps we are taking are aimed at unlocking the value of our Canadian operations and building the value of A&P for the benefit of all of the company's shareholders. They will enable us to de-leverage and strengthen our balance sheet, focus greater attention and resources on our core U.S. operations, and pursue the implementation of our fresh and discount retail formats. These initiatives will position the new A&P to achieve sustainable profitability, long-term growth and success, and increased shareholder value."

The news sent A&P shares to their highest price since mid-2002 on the New York Stock Exchange. They closed May 9 at $22.55, up $4.20, or 23 percent, from the previous close. The previous 52-week high was $18.90.

Though some analysts questioned the logic of selling the Canadian division, which is by far A&Ps most profitable, the company is forging ahead. Speculation is that the most likely bidders for the Canadian division are rival supermarket chains Metro Inc., which operates predominantly in Quebec, and Sobeys Inc. headquartered in Nova Scotia, the No. 2 retailer in Canada after Loblaw Cos.

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A&P also said it intends to divest its Farmer Jack and Food Basics operations and support facilities in Michigan and Ohio. Its U.S. holdings also include Super Foodmart, Super Fresh and Sav-A-Center. After the restructuring, the new A&P grocery chain will include 250 stores in the metropolitan New York area, under the A&P, Waldbaums and Food Emporium banners and discount operations growing under the Food Basics name. The A&P banner will also include 75 stores in the mid-Atlantic region, with fresh stores developed under the SuperFresh banner and discount operations as Food Basics, in the greater Philadelphia and Baltimore markets.

The company said it will continue to operate 28 stores in the New Orleans market under the Sav-A- Center banner, though these operations are not part of the core business designated for expansion.