The Great Atlantic and Pacific Tea Co. Completes $435MM Capital Raising Effort
05 August 2009 - 3:56AM
Business Wire
The Great Atlantic & Pacific Tea Company, Inc. (A&P)
(NYSE:GAP) announced today that affiliates of The Yucaipa
Companies LLC (“Yucaipa”) invested $115 million in A&P by
purchasing 115,000 shares of A&P’s newly created 8.0%
Cumulative Convertible Preferred Stock, Series A-Y pursuant to an
investment agreement executed among Yucaipa and A&P dated as of
July 23, 2009. In addition, partners of Tengelmann
Warenhandelsgesellschaft KG (“Tengelmann”) invested $60 million in
A&P by purchasing 60,000 shares of A&P’s newly created 8.0%
Cumulative Convertible Preferred Stock, Series A-T pursuant to an
investment agreement executed among partners of Tengelmann and
A&P dated as of July 23, 2009. A total of $175 million was
invested in A&P pursuant to a private offering. At the same
time, A&P announced today the completion of its previously
announced offering of $260 million of 11.375% senior secured notes
due 2015 (the “Notes”), successfully accomplishing a fund raising
effort resulting in gross proceeds to the Company of $435
million.
The injection of $175 million of equity capital, combined with
raising $260 million through the issuance of the Notes,
significantly strengthens A&P’s balance sheet and provides
additional liquidity for the Company to pay down a portion of its
senior credit facility and compete in the dynamic food retail
industry.
The equity investments bring together two of the most prolific
investors in the US grocery retail industry: Tengelmann, one of the
world’s largest family owned operators of diversified retail
businesses comprising global revenues in excess of $35 billion; and
Yucaipa, one of the most successful investors in the US supermarket
industry in the last 15 years. Together they will provide A&P
with unparalleled knowledge, resources and expertise in this
difficult environment. This relationship is expected to enable
A&P to accelerate its format optimization strategy, drive the
implementation of its business improvement initiatives and
facilitate the turnaround of its Pathmark business. The new funds
provide the Company significant additional cash resources to
successfully execute its strategies and navigate through this
difficult economy effectively with a focus on building sustainable
profitability in the longer-term.
On a fully diluted basis, Tengelmann remains the largest single
shareholder of the Company with an ownership interest of 38.6
percent. Yucaipa’s ownership interest has increased to 27.6
percent. The preferred stock will be convertible, under certain
conditions, at an initial conversion price of $5.00 per share,
subject to adjustment. This conversion price represents a premium
of approximately 20% to the 20-day volume weighted average sale
price of A&P’s common stock prior to the announcement of the
transaction of $4.15. Tengelmann and Yucaipa, as holders of the
preferred stock will have the right to vote together with the
holders of common stock on all matters upon which the holders of
common stock are entitled to vote, on an as-converted basis,
subject to certain New York Stock Exchange stockholder approval
requirements.
In connection with the preferred stock investment, A&P’s
Board of Directors added two new members to its board of directors,
bringing the size of the board of directors to eleven. The new
board members include Mr. Terrence Wallock and Mr. Frederic Brace,
each elected by Yucaipa. Mr. Wallock, 64, has served as a senior
executive officer and general counsel to a number of large grocery
retailers and foodservice operators, including Ralph’s Grocery
Company, the Vons Companies and Denny’s, Inc. Mr. Brace, 51, has
served as a senior executive officer in the airline industry and
was the former Chief Financial Officer of United Airlines.
“Working together with Yucaipa is an exciting opportunity to
collaborate with one of the most successful investors in the
supermarket industry. I have enjoyed a productive relationship with
Ron Burkle for many years and I believe that together we will drive
significant performance improvement in the business and realize the
tremendous potential and strategic value of A&P” said Christian
Haub, Executive Chairman, A&P and Co-Chief Executive of
Tengelmann.
“I also want to welcome Terry and Jake to our Board of
Directors. The addition of their knowledge and experience will
further enhance the strength of our Board and I’m looking forward
to working with them in creating value for our shareholders”
concluded Mr. Haub.
About A&P
Founded in 1859, A&P is one of the nation's first
supermarket chains. The Company operates 435 stores in 8 states and
the District of Columbia under the following trade names: A&P,
Waldbaum's, Pathmark, Pathmark Sav-a-Center, Best Cellars, The Food
Emporium, Super Foodmart, Super Fresh and Food Basics.
About Yucaipa
The Yucaipa Companies is a premier investment firm that has
established a record of fostering economic value through the growth
and responsible development of companies. Since its founding in
1986, the firm has completed mergers and acquisitions valued at
more than $30 billion. As an investor, Yucaipa works with
management to strategically reposition businesses and implement
operational improvements, resulting in value creation for
investors.
Forward-looking statements
This release contains forward-looking statements about the
future performance of the Company, which are based on Management’s
assumptions and beliefs in light of the information currently
available to it. The Company assumes no obligation to update the
information contained herein. These forward-looking statements are
subject to uncertainties and other factors that could cause actual
results to differ materially from such statements including, but
not limited to: competitive practices and pricing in the food
industry generally and particularly in the Company’s principal
markets; the Company’s relationships with its employees and the
terms of future collective bargaining agreements; the costs and
other effects of legal and administrative cases and proceedings;
the nature and extent of continued consolidation in the food
industry; changes in the financial markets which may affect the
Company’s cost of capital and the ability of the Company to access
capital; supply or quality control problems with the Company’s
vendors; and changes in economic conditions which affect the buying
patterns of the Company’s customers.
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