September 7, 2000 9:55 AM PDT

Online grocers trade assets in $12 million deal

In a move to shore up its profitability, online grocery company Peapod today said it is pulling out of a number of markets in Texas and Ohio, while buying a competitor's operations in Chicago and Washington, D.C.

Under a purchase agreement with Streamline.com, an online grocery and household goods company, Peapod will pay about $12 million in cash for the operating assets of Streamline's operations in the Chicago and Washington markets, including facilities, customer base and work force.

As part of the deal, Chicago-based Peapod will exit Columbus, Ohio, and the Texas cities of Houston, Austin and Dallas by Sept. 15, the company said in a statement.

In April, Peapod was resuscitated by a $73 million investment from international food provider Royal Ahold, a European company with supermarket chains in New England.

The move to acquire some operations and drop others signifies continuing consolidation in the online grocery business, which has seen similar moves by Peapod's competitors.

Web grocers have been hit particularly hard on Wall Street since investors began to flee e-commerce stocks late last year. As the cost of doing business in the market continued to rise, while share prices for many key players tumbled, analysts warned that many companies could become takeover targets or be forced to shut their doors.

The acquisition of Streamline's Washington operations should allow Peapod, working as a subsidiary of Royal Ahold, to begin offering service under the Peapod brand in the Baltimore-Washington area in the fourth quarter, earlier than originally planned.

Peapod's service offerings through the Chicago-based operations formerly owned by Streamline also will begin in the fourth quarter.

In a statement, Streamline said it will use the proceeds from Peapod's purchase to finance operations in its Boston and northern New England markets.

 

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