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Stop & Shop Buys Purity Stores

April 24, 1995

QUINCY, Mass. (AP) _ Two of the Northeast’s oldest supermarket chains have announced that they will merge, raising alarms from consumer groups that shoppers may face higher prices.

Stop & Shop said Monday it had reached an agreement to buy the 55-store Purity supermarket chain for $255 million. The sale was expected to be completed by the summer, assuming regulatory approval is received.

Massachusetts Attorney General Scott Harshbarger harshly criticized the deal, saying it would ``affect the little guy the most.″

If the merger is approved, Harshbarger said, ``Families facing tough economic times could be looking at higher food prices. No matter how you slice it, this merger presents serious questions for Massachusetts consumers. We could not only be facing higher grocery costs, but also fewer jobs.″

Harshbarger said he would bring to bear the full scrutiny of his agency’s consumer protection and anti-trust authority.

But other consumer advocates said the bigger size of the combined chains might actually work to the benefit of customers.

``It really could mean good news if the buying power of the merged company is passed on to the consumers,″ said Priscilla Douglas, Massachusetts secretary of consumer affairs.

The companies said no store employees would be laid off, though some administrative and distribution functions would be consolidated. Purity employs 5,500 people, Stop & Shop more than 30,000.

``Purity has some wonderful employees, and where we have openings here, they will certainly be up for those,″ said Stop & Shop spokeswoman Terry Vandewater. ``It would be hard to offer every single person a position, due to duplication, but we’re doing everything we can.″

Stop & Shop operates 128 stores in Massachusetts, Connecticut, Rhode Island and New York. Purity’s stores are located in Massachusetts, Connecticut and New Hampshire. Purity also owns 66 Li’l Peach convenience stores in Massachusetts.

Purity has suffered under heavy debt and operates many older, small stores in competition with new superstores. It held off an attempted takeover in 1987 by organizing a management-led buyout. Purity’s parent company was sold to Freeman Spogli & Co., a private investment firm, in 1991.

Under the proposed merger, Stop & Shop will assume $135 million of Purity’s debt, $55 million worth of lease obligations and $20 million of other mortgages and notes. Freeman Spogli and other equity holders will get $47 million in cash.

Stop & Shop shares on the New York Stock Exchange closed Monday at $26.50, up $1.87 1/2.

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