The marriage plans for New Jersey-based Pathmark Stores and the European grocery giant Royal Ahold abruptly unraveled yesterday, leaving jilted Pathmark desperate for cash and reportedly filing a lawsuit.
Royal Ahold — which owns Edwards, Stop & Shop and other U.S. grocery chains — said it canceled its planned $1.75 billion purchase of Pathmark in the face of “strong opposition” from the Federal Trade Commission.
But a furious Pathmark Chairman and CEO Jim Donald accused the company of not trying hard enough to close the deal.
“We intend to hold Ahold responsible for the consequences of its actions,” said Donald.
Company officials refused to confirm that a lawsuit had already been filed, but retail consultant Burt Flickinger, who has worked for both companies, said it had already been done.
He also said Pathmark will now have to scramble to come up with roughly $80 million in cash.
“Merrill [Pathmark’s investment banker] is gonna have to go back to Wall Street for a major infusion of capital, because Pathmark had a small bond payment due yesterday, and they have a balloon payment due in April,” he continued.
Privately held Pathmark — which has 135 stores in the New York, New Jersey and Philadelphia area — is just one of many regional grocery stores that have been squeezed from the push by Wal-Mart, Costco, and Kmart into the food business.
Because the big national chains have more buying clout, they can undercut the regional chains’ prices — leaving the smaller businesses to look for a larger partner or go out of business.
The FTC objected to overlap between Royal Ahold-owned and Pathmark stores.
Royal Ahold said it had offered to sell off Pathmark stores that overlapped with its own Edwards stores, but the regulators weren’t satisfied.
FTC officials declined to comment on the deal.
Pathmark bonds plunged on the news, and Ahold shares lost 1.5 percent to $27.15 on the Amsterdam exchange.