A&P Canada Takeover Speculation Begins

Discussion
Oct 31, 2002
George Anderson

By George Anderson


Canadian analysts believe that A&P’s decision to split into separate units makes A&P Canada an attractive takeover target. It would also give the company needed cash to upgrade its US business.


The National Post of Canada reports that analysts estimate that a sale of A&P Canada could be worth up to $1 billion US. The company needs to spend roughly half that every year on its stores to remain competitive.


Sobeys is considered the most interested and likely suitor (assuming a sale is ever discussed). It is Canada’s second largest grocer behind Loblaw and an acquisition of A&P’s stores would help it in Ontario where Loblaw is the clear market leader.


Alden Greenhouse, Dominion Bond Rating Service said, “It would be great for Sobeys, particularly in urban markets like Toronto, where they don’t really have a presence. One wouldn’t pass up a business opportunity like this if it were to come along.”


Metro, based in Montreal, is also believed likely to join in any bidding should A&P Canada go on the market. Metro is the number three grocer in Canada with most of its 800 stores located in the province of Quebec.


Moderator’s Comment: Would A&P be wise to sell
its Canadian operations?


One billion dollars certainly is nothing to sneeze at,
but A&P would be selling off the one piece of its business that is performing
well if it sold the Canadian operations. Perhaps, the company should consider
selling its US operations and trying to buy a Canadian competitor instead.

[George
Anderson – Moderator
]

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