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STOP & SHOP COMPLETES PURITY DEAL BY AGREEING TO SELL OFF 17 STORES

QUINCY, Mass. (FNS) -- Stop & Shop Cos. here last week completed its acquisition of Purity Supreme, North Billerica, Mass., by agreeing with regulators to divest 17 Massachusetts stores.Now, the company is considering bids from supermarket operators interested in buying those 17 units, a Stop & Shop official told SN last week.The agreement to sell the stores was reached with the Federal Trade Commission

QUINCY, Mass. (FNS) -- Stop & Shop Cos. here last week completed its acquisition of Purity Supreme, North Billerica, Mass., by agreeing with regulators to divest 17 Massachusetts stores.

Now, the company is considering bids from supermarket operators interested in buying those 17 units, a Stop & Shop official told SN last week.

The agreement to sell the stores was reached with the Federal Trade Commission and the Massachusetts attorney general's office, which were concerned that Stop & Shop's merger with Purity would create a monopoly in certain parts of the state.

Regulators have stipulated that seven Purity units on Cape Cod should be purchased by a single owner, or at the most two, to provide maximum competition to the eight remaining Stop & Shops there.

The other stores to be divested include six in the Boston metropolitan area, one in Brockton, one in Bedford and two in the South Shore area. Sixteen of the pending closures are Purity banners and one, in Watertown, is a Stop & Shop.

Peter Phillipes, senior vice president and general counsel for Stop & Shop, told SN the company mailed bidding packages last week to parties interested in buying the stores. He declined to identify any of those parties.

"We have had expressions of interest from a number of the major chains in the area, from a lot of independents, from at least three significant wholesalers and also from real estate developers who want to put in clients of their own," Phillipes told SN last week.

Phillipes said it is unlikely that one company will buy all the locations, "but it is likely that companies would buy groups or blocks of stores. Some might be sold individually."

Stop & Shop has hired the New York-based investment firm Furman Selz Inc. to handle the bidding process. The company will select winning bids, which must then be cleared by the FTC. The stores must be replaced by other food stores.

Phillipes said that, although Stop & Shop would have liked to hold on to all its locations, "we're happy with the stores we are keeping and, at the end of the day, the agreement meets our financial expectations and that's the key in any of these deals."

In most cases, Stop & Shop was able to keep its strongest performers, he said.

Bonnie Zwickel, vice president of equity research at CS First Boston, New York, said she expects Star Market Co., Cambridge, Mass., to bid on some of the locations. "They have a small base and they have been trying to expand a bit," she said.

Following the divestiture agreement, Stop & Shop commenced its Purity store conversion program. The first four Purity units converted to the Stop & Shop banner opened last week; four more are slated for this week. Conversions will continue at about the same pace except for the weeks of Christmas and Thanksgiving, when no conversions will take place, Phillipes said. The conversion program is expected to be completed in eight weeks, according to the company.

In addition to the merger, Stop & Shop opened a new store last week in Hamden, Conn. A location in Providence, R.I., is slated to open in December and a Long Island, N.Y., store is scheduled to open in April or May. The company is also in the process of acquiring Melmarkets, Garden City, N.Y., as reported. Melmarkets operates 17 Long Island-based stores.

Following these openings, acquisitions and divestitures, Stop & Shop will operate 189 stores. It previously operated 130 locations.