updated 3/5/2007 9:26:47 AM ET 2007-03-05T14:26:47

The Great Atlantic & Pacific Tea Co., operator of A&P supermarkets, said Monday it will acquire Pathmark Stores Inc. for about $679 million in cash and stock in a deal between largely Northeastern grocers.

The deal create a 550-store supermarket chain operating in the New York, New Jersey and Philadelphia metropolitan areas as well as in the states of Michigan, Louisiana and the Baltimore-Washington, D.C., region.

Pathmark shareholders will receive $9 in cash and 0.12963 shares of Great Atlantic stock for each Pathmark share.

At Friday's closing prices, that would amount to about $13 a share for each Pathmark share, or a 15.5 percent premium over Pathmark's closing price in Friday. Pathmark had about 52.2 million shares outstanding as of its latest regulatory filing.

Great Atlantic & Pacific will also assume an undisclosed amount of debt, boosting the combined value of the transaction to about $1.3 billion, the companies said.

Pathmark shares rose $1.03, or 9.2 percent, to $12.28 in premarket trading. Great Atlantic shares were up 44 cents at $31.30.

After the deal closes, 86 percent of the company will be held by Great Atlantic shareholders and 14 percent will be held by former Pathmark shareholders. The company will have about 49 million shares outstanding.

The Tengelmann Group, Great Atlantic's majority shareholder, will remain the largest shareholder.

Christian Haub, executive chairman of A&P, will continue in that post at the combined company; Eric Claus, president and chief executive of A&P, will also maintain the same position in the combined company.

The deal is expected to close in the second half of Great Atlantic's fiscal year.

Bank of America and Lehman Brothers have committed to provide financing.

A&P said it will raise some cash for the deal by selling shares in Metro Inc. or, if needed, A&P capital stock, totaling $190 million of net cash proceeds. A&P will assume about $170 million of Pathmark capital leases.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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