Pathmark/A&P Merger Update: Second Request Overview

Includes: GAP, PTMK
by: The M & A Researcher

The initial HSR waiting period for the Pathmark (PTMK)/A&P (GAP) merger deal resulted in the expected second request Thursday. The question remains, as is often the case in major grocery mergers, of just how many stores the FTC will ask the companies to sell off in order to consent to the combination. In this deal, the overlaps are limited to a few counties in New Jersey and the New York DMA (Long Island mostly).

All the information gathered to this point suggests a divestiture in the range of 15 to 25 stores, with a very good chance the companies will offer several of their aging outlets in order to both appease the FTC and to shed a few unwanted properties. In the context of the transaction overall, this would be a very positive development for the companies, the communities involved, and any potential buyer wishing to enter or strengthen its position in the overlapping areas. The FTC should have little difficulty accepting the companies' divestiture proposal, assuming the key areas of overlap are addressed.

The only negative aspect going forward in this deal is the relatively long gap between the grocery consolidation of the late-90s / early-2000s to this point in time. The current FTC has not dealt with this sort of transaction much, up to and including the current Wild Oats (OATS)/Whole Foods (WFMI) second request process. Although sorting through individual/local grocery markets is not a terribly complex process, the FTC could have some difficulty in accomplishing this with the efficiency seen a decade ago.

Nevertheless, this continues to be viewed as a fairly easy combination for the FTC and the companies to sort through and therefore the second request process should not be terribly lengthy or arduous. Barring any unforeseen complications, a consent decree can be anticipated in roughly a mid/late-August time frame.

Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.

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