A&P May Put Itself On Sale, But Who's Buying?

Grocery chain A&P is considering putting itself up for sale. The 320-store chain, which emerged from bankruptcy in 2012, told store managers in a memo last week that it is considering multiple options including a sale, according to the Wall Street Journal. An unnamed source suggested Kroger (NYSE:KR), Ahold and Cerberus as possible buyers.

Other options outlined in the memo from A&P chairman Gregory Mays include raising capital, a refinancing or funding slower growth from cash flow. However, a sale is the most likely option and could value the grocer at $1 billion or more, according to an unnamed source quoted by the Journal, the same source said the process is in its early stages.

A&P filed for Chapter 11 bankruptcy in December 2010, and closed 20 percent of its stores. Since coming out of bankruptcy it has increased its liquidity by $200 million and reduced its debt by 30 percent but is still not profitable, the memo said. The privately held company had sales of about $6.3 billion in 2012, according to the National Retail Federation, down from $8.8 billion in 2009.

A&P operates stores under its own name as well as the Food Emporium, Pathmark and Super Fresh banners.

While a sale may really be the most likely option for A&P, the buyers suggested by the Journal's source sound like wishful thinking. Kroger could buy the chain, but it's not exactly an active buyer. It just agreed to buy the 200-store upscale Harris Teeter chain, and before that its last purchase of a chain was in 1999. Ahold would see plenty of geographic overlap with A&P's current stores. Cerberus is an active buyer and just lost with its bid for Harris Teeter, but it still has Albertsons to digest along with its boardroom coup at Supervalu.

For more:

- See this Wall Street Journal story

Related stories:

Kroger Buys Harris Teeter For $2.5 Billion, No Name Change For The Stores
Albertsons Owner Cerberus Makes Bid For Grocer Harris Teeter
Ahold Won't Be Changing Stop & Shop's Name After All