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Wasserstein, Perella And A&P Bid For Gateway

June 20, 1989

LONDON (AP) _ A&P and a U.S. investment firm have joined in a $3 billion cash bid for Gateway Corp., Britain’s third-largest food retailer, and Gateway has urged shareholders to accept it.

Forged Monday night, the U.S. offer valued Gateway at $3.39 a share and would give 50-50 ownership of the company to Wasserstein, Perella & Co. and A& P, which is the fourth-largest U.S. food retailer. A&P is 52.5 percent owned by West Germany’s Tengelmann Group.

The partners will put up a total of $780 million and borrow another $3.4 billion from banks and other sources. Some of the money will go toward refinancing more than $600 million of debt on Gateway’s books.

Gateway Chairman Alec Monk would remain chairman under the deal, but A&P Chairman James Wood would take over as chief executive officer in addition to his current duties.

Long outperformed by competitors, Gateway in April became the target of a $2.9 billion hostile bid from investor group Isosceles PLC, a consortium.

Isosceles may find it hard to increase its already sweetened offer to beat the new one, analysts said. The consortium has effective control of about 27 percent of Gateway shares outstanding.

The offer expires Thursday.

Monk, who spent about $2.0 billion on takeovers between 1982 and 1986, transformed a struggling family-run wholesale food business known as Linfood Holdings into a big British retail holding company.

Monk financed a number of acquisitions through stock offerings, doubling the company’s shares outstanding and depressing its share price. Support among shareholders slipped further when he ran into difficulty digesting Herman’s Sporting Goods Inc. of Carteret, N.J., acquired for $414 million in 1986.

Gateway controls about 11.4 percent of the British grocery market.

The company posted a 3.3 percent drop in pretax profit for the fiscal year ended April 30, 1988, the latest full-year results available.

In a leveraged buy-out, a group of investors purchases a company from shareholders, largely with borrowed funds, then repays the debt through normal operations and asset sales.

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