A&P Selling Canadian Unit

The deal with Montreal's Metro supermarket chain will help the company de-lever its balance sheet.
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agreed Tuesday to sell its Canadian operations to a big Montreal supermarket chain for $1.4 billion in cash and stock.

A&P, of Montvale, N.J., said the sale to Metro will boost liquidity, de-lever its balance sheet and give it capital to roll out fresh and discount retail formats in the U.S. A&P will get a 16% stake in Metro and have two directors on its board.

The Canadian unit posted first-quarter sales of $1.2 billion, up from $1.1 billion a year earlier, while earnings before interest, taxes, depreciation and amortization was $53 million, up from $36 million a year ago. A&P will get $982 million in cash and $409 million in stock in the deal, which it valued at $1.48 billion including debt assumption.

"We are excited to enter into this historic agreement with Metro, which delivers the best possible outcome of our strategy to unlock the value of A&P Canada as announced on May 10," A&P Chief Executive Christian Haub said. "We also look forward to participation in Metro's future with a significant investment position and ongoing relationship with its management."

A&P said that J.P. Morgan served as lead financial adviser and Lehman Brothers served as co-adviser.

Early Tuesday, shares of A&P were flat at $29.57.