The Federal Trade Commission gave A&P a gift in requiring the divestiture of only six stores to complete its acquisition of Pathmark. King Kullen immediately announced a deal to buy five of the supermarkets from A&P — all on Staten Island.
It is fascinating how smoothly the acquisition of Pathmark has gone for A&P, especially when you consider how vehement the FTC was in its opposition to Ahold’s proposed purchase of Pathmark in 1999.
It is always difficult to know what goes through the mind’s of government lawyers, but the substance of the case doesn’t seem to warrant the change.
We attribute it to the lack of competitive opposition to the acquisition. Ahold was seen as a strong company that would come in and provide Pathmark with money for renovations and expansion — so competitors fought the deal behind the scenes.
In contrast, most of the local retailers think that an A&P-controlled Pathmark will be weaker than Pathmark on its own. They haven’t objected at all.
They may be right. Pathmark is a promotion machine. Very high/low in pricing, it has given substantial support to local terminal markets and anyone else who can provide opportunity buys on product. They are probably the largest ultimate receiver of roller cars being sent to New York.
The $64,000 question is: Will A&P give the Pathmark brand the autonomy it needs to keep this promotional machine humming? We have our doubts.
A&P seems focused on high margins and seems too weighed down by committee meetings to move fast enough to seize the opportunity buys that sustain Pathmark.
The saving grace may be that A&P may not own anything for long. The whole deal has the look of window dressing in which Germany’s Tengelmann Group prepares to sell its majority stake, along with the whole company, to a willing buyer.
Stop & Shop has made some inroads with its EDLP format, but A&P is a strong Number One in America’s biggest market — a market where it is difficult to build from scratch as greenfield real estate is almost non-existent.
It is a tempting plum for Kroger or Safeway, especially if they get inklings that Tesco, fresh off its launch in California, is feeling its oats and wants to instantly acquire a variety of concepts, a chunk of market share and a Number One position in New York to go with its Number One position in London.