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MONTVALE, NJ- Metro Inc., a Montreal-based operator of supermarkets and drugstores in Ontario and Quebec provinces, has acquired A&P Canada, a 236-store group operated by A&P Luxembourg Sarl, a subsidiary of locally based A&P. The sale price is in the range of nearly $1.5 billion and the completion of the deal is subject to customary conditions and reviews.

Of the total sale price, $982 million will be in cash and the rest in stock and certain debt being assumed by Metro. The latter is getting the cash to pay for that portion of the deal from a syndicate of its relationship banks, while the approximately 18.1 million of class A subordinate shares A&P will get from Metro will give the former close to a 16% ownership share in the latter. A&P will also get to have two people on Metro's board.

During a conference call, A&P chairman/CEO Christian Haub said the sale "delivers the best possible outcome of our strategy to unlock the value of A&P Canada. The cash proceeds will fulfill our financial objectives." Haub added that it will "strengthen and de-leverage our balance sheet, improve liquidity and provide sufficient capital to continue our fresh and discount retail formats in the US. This represents a major step toward our goal of achieving sustained profitability by 2007."

"The acquisition, combined with [our operations in Ontario and Quebec] enhances Metro's strategic position in Canada's two largest markets," says Metro president/CEO Pierre H. Lessard, in a written statement. "The strategic and geographic fit between our two companies is compelling. This is a unique opportunity to transform Metro's strong regional base into a significantly larger platform with increased scale and geographic diversification."

A&P Canada operates stores under the A&P, Dominion, Ultra Food & Drug, Food Basics and the Barn Markets banners. The unit's Q1 2005 sales were $1.2 billion, up from $1.1 billion a year earlier. EBITDA for Q1 was $53 million vs. $36 million a year earlier, and EBITDA for the 12 months ended June 18, excluding certain IT and litigation-related costs, was $164 million.

Metro, meanwhile operates stores in eastern Ontario and in Quebec province under the Metro, Loeb, Brunet and Clini Plus banners. JP Morgan Securities Inc was the lead financial advisor, and Lehman Brothers served as co-advisor.

Instant Insights /

A&P Sells Canadian Stores for More Than $1B

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