GRISTEDE'S TRIES TO RAISE MONEY TO BUY 28-UNIT KINGS

DAVID GHITELMAN

PARSIPPANY, N.J. -- The nearly three-year effort of London-based retailer Marks & Spencer to sell its 28-store Kings Super Markets chain here may soon end if Gristede's Foods, New York, is able to raise the agreed-upon price of $155 million in the next few weeks.

Early last week, Gristede's filed papers with the Securities and Exchange Commission declaring that it had begun an offering of $175 million in unregistered senior notes. According to the filing, the money would be used to purchase all outstanding Kings common stock for $155 million, pay a portion of Gristede's outstanding debt, pay fees and expenses related to the offering and for general corporate purposes.

After filing with the SEC, John Catsimatidis, Gristede's majority stockholder, chairman and chief executive officer, embarked on a two-week tour of 16 U.S. cities in an effort to sell the senior notes, a spokesman for Marks & Spencer told SN.

Catsimatidis could not be reached for comment.

A veteran supermarket industry analyst, who requested anonymity, said it was not unusual for corporate executives to raise money in face-to-face meetings with investors. However, the analyst told SN, it was "very strange" that Gristede's would attempt to raise the money through unregistered notes, which cannot be sold and therefore have no cash value until they mature.

The investors are going to have "less liquidity," the analyst explained, and Catsimatidis is "going to be very restricted" in how he uses the money.

As previously reported, M&S entered into an agreement in early June with Gristede's, giving it the exclusive right for three weeks to negotiate a definitive stock purchase agreement to acquire Kings.

Last week, the M&S spokesman said the agreement had been extended by "about another two weeks," adding that M&S would not back out of the deal if it took Gristede's an extra day or two to raise the necessary funds. "There is nobody else in the picture," he noted.

M&S has been periodically attempting to sell Kings since September 1999, putting it on the market and then taking it off when no satisfactory bids were received.

The M&S spokesman said the sale was part of a strategic decision by M&S to "concentrate on its core business" in the United Kingdom. He noted that the company sold off all its businesses in continental Europe, as well as its Brooks Brothers clothing stores in the United States.

"Kings has been a profitable business," he pointed out. (Kings had a net profit in fiscal 2001 of $10.3 million, according to the Gristede's filing with the SEC.) "We're in no hurry to sell. We are looking for the right buyer at the right price and are not going to panic."

Gristede's said in its SEC filing that it believes the Kings acquisition will result in $7.6 million in annual synergies beginning the second full year of operations following the purchase.

Gristede's, which had sales last year of $230.2 million, operates 42 supermarkets and two drug stores, all in the New York metro area, with 37 of those supermarkets and both drug stores in Manhattan.

Kings, which had sales last year of $444.8 million, operates 26 supermarkets in northern New Jersey and two in Long Island, N.Y.