Supermarket chain Pathmark Stores Inc. is in talks to be sold to C&S Wholesale Grocers Inc., New England’s largest food wholesaler, The Post has learned.
Exact terms of the transaction aren’t known, but people familiar with the matter said C&S Wholesale – the grocery wholesale company that is Pathmark’s major supplier – has emerged as the top contender to purchase the beleaguered Carteret, N.J.-based chain.
Analysts and bankers have previously estimated the company to be worth between $800 million and $900 million.
Although the companies are working toward an agreement, sources warned that talks are at a delicate stage and could fall through. There is also a chance that another bidder could step in.
If talks stay on track though, a deal could be announced in the next several weeks.
A spokesperson for Pathmark declined to comment and representatives from C&S couldn’t be reached for comment yesterday.
Pathmark operates more than 140 supermarkets – including Pathmark Super Centers – in highly populated markets in New York, New Jersey, Pennsylvania and Delaware.
It is the No. 2 supermarket in New York City, with more than a 16 percent market share, behind Great Atlantic & Pacific Tea Co.’s A&P, which commands 21 percent.
Pressured by stiff competition and declining sales, Pathmark announced in December that it had retained investment bank Dresdner Kleinwort Wasserstein to explore a sale.
The grocery chain was expected to reel in bids from several industry rivals, real-estate concerns and leveraged buyout firms. However, after being shopped for several months, the company received only lukewarm interest from a few REITs and buyout firms – mainly Apollo Advisors L.P. – leaving observers to assume the struggling supermarket operator would be taken off the block.
Although Pathmark’s supermarkets are well situated in densely-populated – and potentially lucrative markets in the tri-state area, the company has struggled to grow its top line in the face of declining sales, intense competition and a tired store base.
Pathmark’s woes have caused its stock to take a beating. Shares of Pathmark, which hit a 52-week high of $9.27, closed at $4.68 in Nasdaq market trading last week. Based on its current stock price, the company has a market capitalization of $140 million. It has $695 million of long-term debt and $11 million of cash on its balance sheet.
If the company’s shareholders agree to receive little or no premium, a deal might be valued between $825 million and $850 million including debt, or about 6 times 2004 earnings before interest, taxes, depreciation and amortization.
C&S Wholesale, based in Keene, N.H., delivers groceries to roughly 4,000 major supermarket chains, independent grocers and wholesale clubs.
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Shopping around
Pathmark is in talks to be taken over by food wholesaler C & S Wholesale. The supermarket chain could be worth as much as $900 million.
A Pathmark snapshot:
* Chairman: James J. Moody, Jr.
* CEO: Eileen R. Scott
* 2004 sales: $3.9B
* No. of stores: 140
* Locations: New York, New Jersey, Delaware, Pennsylvania
* Competitors: A&P, Stop & Shop