A&P sets sale for remainder of chain; union dispute to resume
“ShopRite has made it clear it will not overpay for any stores, but if no one else claims them, ShopRite could be interested in maybe 30 or 40 locations.”
—CRAIG ROSENBLUM, Willard Bishop
A&P said Monday it is seeking buyers for 153 stores no one has yet bid on — potentially opening the way for ShopRite, C&S Wholesale Corp. or others to make a move.
Companies must submit bids by Sept. 11, or else wait for an auction scheduled for Oct. 7, according to court documents.
Also Monday, the judge overseeing A&P’s bankruptcy case reportedly sent the retailer and its unions back to the negotiating table to resolve a dispute between the sides over bumping and severance obligations. At a hearing Monday, Judge Robert Drain told the parties to resume negotiations with instructions to have a resolution in place by the time the sides meet again Wednesday, according to a report in the Bergen Record. The Record report quoted one union attorney as saying that was “a positive sign” for workers, who face the potential loss of thousands of jobs as a result of store sales and closures.
A&P, which filed for Chapter 11 bankruptcy protection in mid-July, has already secured bids for 118 of its 296 locations and announced plans to close 25 additional stores that are losing money. The 118 stores are scheduled for auction on Sept. 24 and 25.
The announcement that 153 more stores are on the block could attract new market entrants, including Sprouts Farmers Market or The Fresh Market, industry observers said.
More likely, they told SN, are bids from members of Keasbey, N.J.-based Wakefern Food Corp., who operate under the ShopRite banner.
“ShopRite has made it clear it will not overpay for any stores,” Craig Rosenblum, a partner in Willard Bishop, Barrington, Ill., said, “but if no one else claims them, ShopRite could be interested in maybe 30 or 40 locations.”
If ShopRite members do buy some of the stores, it could be a big jolt to competition, a Northeast consultant told SN, “because whenever a ShopRite opens, competition gets tough, and other operators need to sharpen their pricing to keep up.”
C&S, a possibility
Most other possible scenarios involve C&S, the Keene, N.H.-based wholesaler that supplies A&P and would like to retain as much volume as it can, observers said.
C&S will hold onto the volume at the 76 stores on which Ahold-owned Stop & Shop has bid, since Ahold is already one of its customers, they pointed out, “but losing most of the rest of the A&P volume would be a huge loss,” the consultant said, “which makes it kind of surprising C&S hasn’t taken a more aggressive position at this point.
“C&S probably would have made its interest known early on. But it could still submit a bid for X number of stores — including stores that other companies have bid on — or try to sweep up the entire chain.”
According to Rosenblum, it’s possible C&S could arrange for a private equity group to buy some of the stores and run the retail operations — as it did with Grocers Supply Co. in Houston — “which would enable C&S to keep the wholesale business.”
It’s also possible C&S could opt to run some of the stores itself, the Northeast consultant told SN. There is precedent for that course of action, he said, citing the wholesaler’s purchase of the Grand Union stores when that company liquidated in 2001, with C&S finding buyers for some and operating the rest under the GU banner, “though it was not happy with the results,” he added.
Another possibility, he said, “though one that’s less likely, would be for C&S to take a "stalking horse" approach and let a third party make bids for the stores, then pay them a break-up fee and take ownership, which would allow it to re-package the stores and sell them to some of its customers.
According to Neil Stern, senior partner at McMillanDoolittle, Chicago, C&S will get involved directly only as a last resort. “It would probably prefer those stores go to independents it could supply,” he said.
All observers agreed a number of the 153 stores remaining will likely never reopen as supermarkets, aside from the 25 stores A&P plans to close because they are losing money — possibly between 30 to 60 additional units that could go dark because they are just too small to be viable, in bad locations or have leases close to expiration, they said.
Of the 118 A&P stores for which bids have been submitted — subject to approval by the U.S. Bankruptcy Court — Albertsons-owned Acme Markets said it would buy 76 (encompassing 36 stores in New Jersey, 21 in New York, 10 in Pennsylvania, four in Connecticut, four in Delaware and one in Maryland); Ahold-owned Stop & Shop said it would take 25 (including 22 in New York and three New Jersey), and members of the Key Food Cooperative said they would buy 17.
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