US regional supermarket chain Great Atlantic & Pacific Tea Company (A&P) has announced an agreement to sell its Eight O’Clock coffee division to Gryphon Investors, a San Francisco-based private equity firm.

A&P said it will realise cash proceeds of US$107.5m and receive a contingent note for up to $20m, the value and payment of which is based on certain elements of the future performance of the business.

The completion of the transaction is subject to customary conditions and reviews, including the closing of the buyer’s financing, A&P said.

“This transaction will conclude our previously announced asset divestiture initiative to lower debt and reduce operating costs. This included the sales of our northern New England and Wisconsin operations earlier this year,” Christian Haub, president and chief executive officer of A&P, said.

“Upon completion of the Eight O’Clock coffee transaction, we will have realised total proceeds of approximately $285m from the asset divestiture initiatives. Although difficult, these actions were necessary to the revitalisation of our US business and the company’s long-term success,” Haub said.