SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 9, 1999
Pathmark Stores, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 1-5287 22-2879612
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
200 Milik Street, Carteret, New Jersey 07008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (732) 499-3000
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Item 5. Other Events.
SMG-II Holdings Corporation, a Delaware corporation
("SMG-II"), Koninklijke Ahold N.V., a company organized under the laws of the
Netherlands (the "Parent"), and Ahold Acquisition, Inc., a Delaware corporation
(the "Merger Sub") and a wholly owned subsidiary of Parent, have entered into an
Agreement and Plan of Merger, dated as of March 9, 1999 (the "Merger
Agreement"), whereby the Merger Sub will be merged with and into SMG-II and
SMG-II will continue as the surviving corporation under the laws of the State of
Delaware under the name of "Pathmark Holdings Corporation" (the "Merger").
The consummation of the Merger is subject to certain
conditions, including the approval of SMG-II's stockholders, the receipt of
antitrust clearance, and the consummation of the tender offer by the Merger Sub
for all outstanding shares of $3.52 Cummulative Exchangeable Preferred Stock,
par value $0.01 per share, of Supermarkets General Holdings Corporation, a
Delaware corporation ("SMG") and a wholly owned subsidiary of SMG-II.
The Registrant is an indirect wholly owned subsidiary of SMG.
A copy of the press release, dated March 9, 1999, issued
jointly by SMG and Parent, relating to the above-described transaction is
attached as an exhibit to this report and is incorporated herein by reference.
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
99.1 Joint Press Release issued by SMG and Parent, dated March 9, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PATHMARK STORES, INC.
Date: March 10, 1999 /s/ Marc Strassler
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Name: Marc Strassler
Title: Senior Vice President and
General Counsel
Exhibit 99.1
Ahold Announces New US Supermarket Acquisition
Pathmark Stores to join Ahold Group
o Pathmark: 132 supermarkets with estimated 1998 sales of USD 3.7 billion
o Acquisition strengthens Ahold position in metro New York
o Edwards integration into Pathmark
o Ahold pays approx. USD 1.75 billion for full control including assumption
of debt
o Enhancing to Ahold's earnings per share
Zaandam, The Netherlands / Carteret, New Jersey, March 9, 1999 - Royal Ahold,
the international food retailer, has agreed to acquire the US supermarket
company Pathmark Stores Inc. ("Pathmark"). The company has reached agreement
with SMG-II Holdings Corporation ("SMG-II") to acquire all of the outstanding
capital stock of SMG-II. This holding company controls Pathmark through its
subsidiary Supermarket General Holdings Corporation ("SMGH").
The total price payable by Ahold for all of the capital stock of SMG-II and the
preferred stock of SMGH is approximately USD 250 million. Pursuant to the
agreement, Ahold will also indirectly assume all of the indebtedness of
Pathmark, amounting currently to approximately USD 1.5 billion. In connection
with the acquisition, Ahold will make a tender offer for all of the publicly
traded preferred shares of SMGH at a price of USD 38.25 per preferred share. The
SMGH board of directors has unanimously determined that the tender offer is fair
to, and in the best interests of, the preferred shareholders. The acquisition is
expected to be non-dilutive to Ahold's earnings per share growth in the first
year and enhancing thereafter.
Strengthening Ahold's US market position
The acquisition of Pathmark, headquartered in Carteret, New Jersey, provides
Ahold with a solid market position in densely populated metro New York,
including Northern New Jersey, New York City, Long Island and Philadelphia.
Pathmark, with estimated 1998 sales of USD 3.7 billion, operates most of its 132
large supermarkets in this trade area. With 25 million people in metro New York,
Pathmark has a market share of approximately 12%. It is Ahold's intention to
fully integrate its Edwards supermarkets in New Jersey, New York City and Long
Island into Pathmark, making it one of the best-positioned food retailers in the
area. The chain will operate under the Pathmark banner as a stand-alone Ahold
operating company.
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Local consumer benefits from the acquisition are expected to be significant in
the coming years. Ahold plans to upgrade the Pathmark stores into state of the
art supermarkets and use its economies of scale and synergy programs to enhance
the shopping experience.
The acquisition of Pathmark will strengthen Ahold's leadership position in the
important markets of metro New York and Philadelphia. This is in addition to
Ahold's leading positions in other large cities such as Boston (Stop & Shop),
the Washington DC and Baltimore metropolitan areas (Giant-Landover) and Buffalo
(Tops).
Of the 132 Pathmark stores, 25 are located on Long Island, 18 in New York City,
7 in Westchester/Rockland, 52 in Northern New Jersey, 10 in Southern New Jersey,
16 in Pennsylvania and 4 in Delaware.
Features of Pathmark
The 132 supermarkets operating under the Pathmark banner have a total selling
area of 5.1 million square feet. A Pathmark supermarket has an average selling
area of 38,600 square feet and its annual sales per square foot of USD 720 are
among the highest in the Country.
Almost all Pathmark stores are Superstores, offering their customers the
convenience of one-stop shopping. A typical Pathmark Superstore features large
perishables departments, a meat department with a deli, seafood, health and
beauty care and bakery departments, video rentals, a pharmacy and a customer
service desk with in-store banking facilities. Pathmark is highly regarded in
its communities for its well-located stores and broad range of quality food
items and general merchandise.
As of January 1998, the company employed approximately 28,000 people of whom
20,500 worked on a part time basis.
Financial background Pathmark
For the three quarters ending October 1998 Pathmark reported sales of USD 2.7
billion and operating earnings of almost USD 97.0 million, resulting in an
operating margin of 3.5 % and cash flow of USD 156 million (EBITDA 5.7% of
sales). While operationally a well performing food retailer, Pathmark has been
highly leveraged requiring it to use extensive cash to make interest payments.
Ahold intends to restructure Pathmark's debt so that cash generated can be
invested to upgrade the stores and improve the quality of the shopping
experience for their customers. The
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acquisition is subject to review by regulatory agencies. Ahold expects to have
the approvals in the second half of 1999 and complete the transaction shortly
thereafter.
Transaction
Completion of the transaction is subject to a number of conditions, including
obtaining necessary US regulatory approvals and at least 66-2/3 % of the
preferred shares being tendered into the offer. Shareholders of SMG-II, holding
a sufficient number of shares to approve the merger, have agreed to vote their
shares in favor of the merger.
In the event the 66 2/3% is not tendered, SMG-II has agreed to cause its
subsidiary to sell all of the outstanding shares of Pathmark for the same
purchase price. Following the tender offer, SMGH will merge with SMG-II, and the
remaining preferred shares will be converted into the right to receive USD 38.25
per share in the merger.
Acquisition to positively impact on Ahold's earnings per share growth
Ahold management anticipates that the integration of Pathmark within Ahold USA
will result in USD 30 million of cost savings for the combined organization in
its first year. This will increase to USD 50 million in the second year.
The acquisition is expected to be non-dilutive to Ahold's earnings per share
growth in the first full calendar year and enhancing thereafter.
Funding of Pathmark acquisition
Ahold intends to fund the purchase of all of the SMG-II common stock and the
SMGH preferred stock (USD 250 million) by drawing on existing committed
long-term credit facilities. Once Ahold has taken control of Pathmark it plans
to immediately redeem all existing outstanding debt obligations. Part of the
debt restructuring may be funded with newly issued equity capital.
Ahold in the United States
In the United States Ahold is the leading supermarket operator along the eastern
seaboard with over 1,000 stores. Ahold currently owns five companies: Stop &
Shop with stores in Connecticut and Massachusetts; Giant-Landover in the
Washington DC and Baltimore metropolitan areas, Giant-Carlisle including the
Edwards division in Pennsylvania; Tops Markets in western New York State and
BI-LO in the Carolinas.
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The Ahold USA companies generated 1998 sales of USD 16.2 billion with operating
results of 714 million. Ahold employs approximately 130,000 people in the US.
The supermarkets have an excellent name with their customers and are recognized
for superior value for money and service. The company is making substantial
progress in developing synergies among its US chains benefitting its customers.
Private label products are purchased jointly and IT systems, distribution,
construction and administrative processes are being integrated.
Pathmark customers will benefit from the economies of scale Ahold generates in
the US once the acquisition is completed.
Ahold in the world
In addition to the United States Ahold also operates prominent supermarket
chains and hypermarkets in The Netherlands and other European countries
including Portugal, Spain, the Czech Republic and Poland. Ahold also has
operations in Latin America and the Asia Pacific region. The company operates
more than 3,600 supermarkets, hypermarkets and specialty stores worldwide with
1998 sales of over USD 30 billion. Ahold employs over 280,000 people in 17
countries and serves 25 million customers every week.
Comments by Bob Tobin, President & CEO Ahold USA
"The acquisition of Pathmark provides Ahold with a large number of high quality
locations in an attractive market where our position left room for improvement.
This is now going to change. We are delighted to be able to service many new
customers under the Pathmark banner. We have various positive contributions in
mind and expect considerable synergies from the integration with our sister
operations. We have already gained quite a lot of experience in generating
synergies following our other successful acquisitions. We have shown this
recently after the fourth quarter 1998 acquisition of Giant-Landover and earlier
in 1996 with Ahold's acquisition of Stop & Shop. In particular, the exchange of
best practices, the restructuring of the Pathmark balance sheet and the
integration of certain administrative functions will positively impact on cost
and benefit the bottom line significantly. We also see important advantages for
local Pathmark customers as we offer them the upgrading of their favorite stores
and the continuity of shopping in a well-stocked supermarket where they can
count on quality service. That's what Ahold stands for. We are very excited
about this acquisition."
Comments by James Donald, CEO of Pathmark
"The acquisition of Pathmark by Ahold is excellent news for us, our customers
and associates. In the last two years we have made significant progress
improving our operations to which customer reaction has been most positive.
However to stay maximum competitive and grow the business in
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the future, our company is much better positioned by teaming up with Ahold and
becoming part of a much larger group, than traveling to do it independently.
Ahold is known for its customer focus and how it succeeds in satisfying their
needs. We are excited about the opportunity to benefit from Ahold's economies of
scale and synergy benefits to step up our services in the local communities and
improve the company's results. As an Ahold company we will be optimally
positioned to realize our considerable potential and grow much faster. We're
ready for it and so are our customers."
