**BREAKING NEWS** The Pantry to Acquire Golden Gallon

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**BREAKING NEWS** The Pantry to Acquire Golden Gallon

By John Lofstock - 08/26/2003
CHATTANOOGA, Tenn. -- Three years ago Pete Sodini lost out on a chance to acquire the Golden Gallon chain to Ahold USA, and, admittedly, he never stopped coveting the Chattanooga, Tenn.-based chain. Today, his persistence paid off as The Pantry Inc. signed a letter of intent with Ahold to acquire Golden Gallon's 138 convenience stores in Tennessee and Georgia. Financial terms of the deal were not disclosed.

"This is a natural fit now, as it was three years ago," Sodini said in a conference call today with reporters and analysts. "These units have attractive efficiencies and afford us an opportunity to create some real synergies in our operations."

This time Sodini said he was determined not to let the Golden Gallon chain slip away. The Pantry, which operates 1,271 stores in 10 southeastern states, conducted its due diligence and negotiated the deal on an exclusive basis, he said.

Sodini declined to comment on the specific purchase price or specific synergies involved. However, he said the deal would be funded by existing capital, sale-leaseback financing and debt financing, and he expects the deal to close by the beginning of the fourth quarter.

The Pantry is very familiar with Golden Gallon's operations because it is competing with the chain in several markets, most notably Nashville, Tenn., where it has 12 stores and Golden Gallon also has about a dozen. Sodini called all of the acquired stores "sterling, in good to excellent condition" and said they would require "very little capital" to convert them to The Pantry's standards.

Among the immediate operational boosts The Pantry will receive is market share. Currently, the company operates 14 stores in Tennessee and 56 in Georgia. Of the 138 Golden Gallon stores, 90 are in Tennessee and 48 are located in Georgia. The greater presence of company-owned stores should allow The Pantry to negotiate better purchasing prices on key items like fuel and tobacco.

"This acquisition increases our presence in the Tennessee and Georgia markets, providing us the opportunity to capitalize on synergies of the combined group," Sodini said.

All of the acquired units will retain the Golden Gallon name, which was first introduced in 1959. "More than any of our previous acquisitions we would be disinclined to rebrand the Golden Gallon stores because of the strength of the brand in the market," Sodini said. "We would be more inclined to rebrand stores in that market to the Golden Gallon brand."

In addition to the convenience stores, Sodini said the deal also includes an attractive portfolio of properties. Of the 138 stores, real estate is company-owned on 131 of them. Plus, The Pantry also acquired the rights to 10 development properties and 16 investment properties in the region, Sodini said.

As for Ahold, Business First of Buffalo is reporting the company will also sell off its Wilson Farms Neighborhood Food Stores division, which is operated by its Tops Markets LLC subsidiary. Although denied by company officials, sources have said a private investor group has made overtures to Ahold USA about purchasing the 205-store Wilson Farms convenience store chain.

Sources told Business First of Buffalo the investment group initially offered $35 million for the chain and that was rejected, as was a later $40-million deal. Reportedly, Ahold is considering a $45 million package.

A clearer picture of Ahold's intentions for Wilson Farms might come at next month's meeting of Royal Ahold shareholders, the Dutch holding company that owns Tops. The meeting in the Netherlands will be the first since it was revealed that Royal Ahold overstated its 2001 and 2002 earnings by $880 million. Nearly $29 million in accounting irregularities in connection with Tops have also been reported.

Stefanie Zakowicz, Tops' spokesperson, declined to comment on the future of Wilson Farms. Ahold, last November, announced plans to review its entire corporate portfolio. "Our current divestment program is proceeding expeditiously," she said. "If, and when, we have something to announce specific to Wilson Farms, we will."

Deal at a Glance
Founded in 1959, Golden Gallon operates 138 convenience stores -- 90 in Tennessee and 48 in northwest Georgia. For the year ended December 2002, Golden Gallon had sales of $375 million.

The Pantry Inc. operates 1,271 stores in 10 southeastern states under a number of banners including The Pantry, Kangaroo, Handy Way, Lil' Champ Food Store, Quick Stop, Zip Mart, Fast Lane, Big K, Depot and Mini Mart.