Bidding war continues for Penn Traffic grocery outlets

The bidding war for the retail grocery outlets held by Penn Traffic has escalated into at least a three-way competition in the past few days, but one analyst says Tops markets may have trumped Price Chopper's Tuesday offer with its $90 million bid later in the week - at least for now.

That's according to the Buffalo (N.Y.) News, the dominant daily newspaper where Tops is headquartered. The News broke the story Saturday about Tops bid for the Penn Traffic stores.

Tops Markets offered to buy all of Penn Traffic Co.'s 79 grocery stores, including the three P&Cs and two Bi-Los in Bradford County, the Buffalo newspaper reported. The bid put Tops in competition with Price Chopper, which bid $54 million for 22 Penn Traffic stores, including the P&C in the Towanda area. A group of four companies specializing in liquidation has also entered a bid in the amount of $36.5 million for all of Penn Traffic's assets.

Web sites for Penn Traffic, Tops and Price Chopper did not offer fresh reports about the bidding on Saturday.

Tops has a retail outlet in Sayre along with 70 other retail stores in New York and Pennsylvania. Price Chopper, with 118 stores in New York, Pennsylvania and New England, is headquartered in the Albany, N.Y. area.

In a related development late last week, U.S. Sen. Charles Schumer, D-N.Y., asked Michael Neal, the chief executive officer of Penn Traffic Co.'s major creditor, GE Capital, to offer flexibility on credit terms for Penn Traffic, parent company of P&C, so that stores can remain open and operating through the end of January, several New York State newspapers reported this morning.

There was no word on Saturday about a response.

GE Capital has been planning on giving Penn Traffic until the first week of January to find a bidder or bidders, a deadline Schumer said is too soon to make such a deal possible, newspapers reported.

Any offers must be approved by Penn Traffic and the bankruptcy court.

People close to the situation said Friday that Tops wants to "get in and operate stores as soon as possible, without interruption in service to the store's customers or employees," The Buffalo News reported. While Tops' "formal, bona fide bid" had not been rejected by Penn Traffic Co. and the committee of creditors it is indebted to, a decision, if any, on the bid had not become public at the end of the week.

Tops Markets has hefty financial backing. Morgan Stanley Private Equity funded the purchase of the supermarket chain from Ahold for $310 million in 2007, according to The News.

Burt Flickinger III, managing partner of New York City area retail consulting firm Strategic Research Group, said acceptance of Tops' bid should be a no-brainer. "A bundled bid is always better than a broken, bifurcated bid," he was quoted by The News as saying. Tops ownership would best serve the company's creditors, workers and the communities in which they do business, according to Flickinger.

Flickinger, who is quoted in a number of New York State daily newspaper as a retail grocery expert, talks favorably about Tops. He comes from a Western New York grocery family, is familiar with Penn Traffic stores, and is a widely respected retail consultant and analyst, according to the Syracuse Post Standard.

Strategic Research Group pricing studies have found Price Chopper implemented competitive price strategies when it faced competition, but raised prices dramatically when it became a community's primary supermarket, such as in the Lake Placid area, The Buffalo newspaper reported Saturday. For example, "Shoppers in the Adirondacks are upset their standard of living dropped significantly when Price Chopper got a virtual monopoly there," said Flickinger. "When Price Chopper became the only store, it raised prices to a point that was very painful for consumers."

The Syracuse-based Penn Traffic, which employs more than 5,500 people, is selling 79 supermarket locations as part of a Chapter 11 bankruptcy filing undertaken last month. The stores operate under the names Bi-Lo, P&C and Quality in New York, Pennsylvania, Vermont and New Hampshire.

Penn Traffic filed bankruptcy last month for the third time in a decade. This time, the company is seeking to sell all its assets. The company lost $17.6 million last year, an improvement over its $42 million losses in 2007, according to The News.

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