A&P SAID WINDING UP DEAL TO SELL COFFEE ASSET

Barbara Murray

MONTVALE, N.J. -- A&P's drive to sell its venerable Eight O'Clock Coffee brand could be close to fruition, with a deal reportedly in the final stages of agreement for about $150 million.

A spokesman for the Great Atlantic & Pacific Tea Co. here had no comment for SN.

The potential buyer of the brand, which was established in 1919, is said to be Gryphon Investors, a private equity firm in San Francisco. Kurt Kaull, a principal there who heads Gryphon's consumer products practice, told SN he could not confirm or deny a recent published report that noted the proposed deal is still in negotiations. The report said that if it doesn't collapse, the deal could be announced within the next few weeks.

A&P has been shedding assets since the first of the year to pay down its debt and help it return to profitability. This spring the company sold eight stores in New England and seven in Wisconsin.

The whole-bean coffee could still be available in A&P-owned stores, if it makes the right deal with the new owner, according to sources.

"This will be blind to the consumer. It looks like mostly a financial transaction," said Jonathan Ziegler, principal in PUPS Management, Santa Barbara, Calif.

Dave Nichol, president of Dave Nichol & Associates, Toronto, and founder of the President's Choice label for Loblaws in Canada, noted that "something is really pushing A&P stock -- it's doubled in the last six months."

Nichol thought it might be a sign of confidence in A&P's new president, Brian Piwek, a Canadian, who has proved himself with A&P Canada.

Others say that A&P is not the only retailer whose stock is going up.

"I think there is speculation that the asset sales are helping," said Gary Giblen, senior vice president, C L King Associates, New York. "You don't know how much profitability is being given up," however, he added.

In November 2002, as reported by SN, A&P realigned its management structure to leverage the success of its Canadian division, hoping that leadership from north of the border will revive its struggling U.S. operations.

Analysts said they expected the new head of the U.S. division, Piwek, to ramp up the expansion of the Food Basics limited-assortment format and attempt to re-energize A&P's flagship stores, but they also noted that he has limited capital resources to do so. Analysts and others in the industry speculated that the company might seek to sell all or part of its operations to fund such improvements.

Piwek, a five-year veteran of A&P Canada who has presided over an impressive performance at that division, holds the titles of president and chief executive officer, A&P U.S.