Great Atlantic & Pacific Tea Co. to Buy Pathmark Stores Inc. for 0.17 Times Revenue

Weekly Corporate Growth Report, Mar 12, 2007

The Deal: The Great Atlantic & Pacific Tea Company has agreed to acquire Pathmark Stores Inc. Under the terms of the agreement, each share of Pathmark will be exchanged for $9 in cash and 0.12963 shares of Great Atlantic stock. Based on recent share prices, the deal values Pathmark at approximately $13 per share, or about $679 million. The deal price represents a premium of 15.5 percent over Pathmark's closing price prior to the deal announcement. In addition, Great Atlantic will also assume an undisclosed amount of Pathmark debt, bringing the total deal value to about $ 1.3 billion. The transaction is expected to close in the second half of Great Atlantic's fiscal year. After the deal closes, current shareholders of Great Atlantic will own 86 percent of the company and current Pathmark holders will own 14 percent.

Discussion: Pathmark Stores operates more than 140 supermarkets, all under the Pathmark brand name. The company's stores are located in densely populated areas of Delaware, New Jersey, New York, and Pennsylvania. Many of the company's stores are Super Centers, offering an expanded selection of merchandise. Most Pathmark stores have pharmacies, and many have in-store banks.

Great Atlantic & Pacific operates about 410 supermarkets in nine states. The company operates stores under the A&P name, as well as seven other local brand names including Farmer Jack, Super Fresh, Waldbaum, and Sav-A-Center.