Angelo Gordon, MTN take over Marks & Spencer unit

Angelo Gordon and MTN Capital Partners have teamed up with former Duane Reade head Bruce Weitz to take over Marks & Spencer’s US grocer Kings Supermarkets in a $61.5m deal.

Angelo Gordon & Co. and MTN Capital Partners, both based in New York, have aligned themselves with former Duane Reade chief executive Bruce Weitz to acquire Kings Supermarkets, a grocer with 26 stores in New Jersey and Long Island, New York. The buyers paid $61.5 million (€51 million; £35.4 million) for the assets, carving the business out of London’s Marks & Spencer Group plc.

Kings has largely wallowed under Marks & Spencer. The London grocer acquired the business in 1988, paying £67 million for the franchise, according a research report issued by stock analyst Seymour Pierce.

The company has tried to sell the Kings operations three times prior. In 2002, Marks & Spencer had seemingly reached a deal to unload the Kings assets to competitor D’Agostino Supermarkets for $160 million, and after that deal fell through, it inked a $120 million sale agreement with Gristede’s Foods. Both transactions dissolved when the buyers were unable to get financing. The sale to Angelo Gordon and MTN is expected to close by the end of April.

Many old-line grocers in the US have struggled in recent years. Wal-Mart’s far-reaching tentacles have embraced the segment luring the cost conscience consumer, while high-end options such as Whole Foods and Trader Joe’s attract shoppers in search of quality. In turn, household names such as Winn Dixie have sunk into bankruptcy and others like A&P have struggled.
Private equity firms have been proactive in picking up the pieces. Lone Star Funds recently took over Royal Ahold units Bruno’s and Bi-Lo Holdings; Yucaipa Cos. grabbed a significant stake in Pathmark last March, and in January, Cerberus Capital Management got a small piece of Albertson’s assets as part of the chain’s $17.4 billion merger with SuperValu and CVS.

The Kings buyers see the assets as playing into the upscale segment of the market. Brent Leffel, a director at Angelo Gordon, told PEO, “Kings is more geared toward the higher end of the market…The gourmet-food retailing concept is an area that we really like, and the trends are quite positive in this segment.”

Angelo Gordon made a similar investment in 2003 when it acquired White Hen Pantry out of the Clark Retail Enterprises bankruptcy. Bruce Weitz, meanwhile, in addition to running Duane Reade, had previously held executive positions at First National Supermarkets, Wakefern Food Corp. and Price Chopper Supermarkets.