Boscov’s Department Store LLC has signed an asset purchase agreement for the sale of substantially all of its assets to a family group led by former chairman Albert Boscov and former president Edwin Lakin, both of whom retired in 2006.
Reading, Pa.-based Boscov’s has formally terminated the agreement signed in September with private equity firm Versa Capital Management Inc. Financial terms of the Boscov-Lakin offer weren’t immediately available.
However, because Versa, as the stalking horse bidder, had offered $11 million in cash for Boscov’s, it’s assumed that unsecured creditors can expect to get back at least 12.2 cents on the dollar for the $90 million that was owed to them. Including the assumption of debt, the Versa deal had a total value of about $288 million, meaning the Boscov-Lakin offer would have a minimum value of $292 million because of the $4 million breakup fee to which the Philadelphia-based Versa is entitled to receive under its stalking horse agreement.
“On behalf of the company, I am very pleased that we have been able to sign an [asset purchase agreement] that has the support of the official creditors committee,” said Ken Lakin, chairman and chief executive officer of the 39-unit chain. Ken Lakin is the son of Edwin Lakin and nephew of Albert Boscov.
Lakin said the “agreement maximizes the value of our business and the return to our creditors. It also provides certainty about the future direction of our company. As we move toward the completion of our restructuring process, Boscov’s will be well-capitalized and have the resources to build a stronger and more competitive business.”
The purchase agreement is subject to bankruptcy court approval in Delaware on Nov. 13 and the ability of the Boscov and Lakin families to complete financing. The transaction is expected to close before the end of November.
The 97-year-old chain operates 39 department stores in five states: Pennsylvania, New York, New Jersey, Maryland and Delaware. The retailer filed a voluntary Chapter 11 petition for bankruptcy court protection on Aug. 4 in Delaware.
At the time of the filing, Boscov’s operated 49 stores in six states, and in 2007 posted sales of slightly more than $1.25 billion. It has since closed 10 unprofitable sites, including seven of the 10 that it bought from Federated Department Stores Inc., now Macy’s Inc., in 2006.
Like other regional players, such as the publicly held The Bon-Ton Stores Inc. and Gottschalks Inc. and even the larger Dillard’s Inc., Boscov’s has been beset by competition from larger competitors with higher sales, a more national presence and greater economies of scale. The downturn in consumer spending that followed the escalation in fuel prices, compounded by the credit market’s convulsions, complicated the company’s ability to remain solvent.
Described as the largest family-owned, full-service department store chain in the U.S., the typical Boscov’s store serves smaller, middle-market communities. The stores and Web site feature national and private label brands, as well as specialized departments, such as beauty salons and eye care outlets. Boscov’s counts as competitors Macy’s, Wal-Mart Stores Inc., Kohl’s Corp., J.C. Penney Co. Inc., Sears and Kmart.
The Boscov and Lakin families, which own 95 percent of the retailer, had injected nearly $30 million to shore it up in the month before the Chapter 11 filing.
At the time of the filing, Boscov’s had 9,500 employees and relationships with more than 3,000 vendors worldwide. For the three months ended May 3, it posted sales of $263 million. Boscov’s said it had $538 million in assets and $479 million in liabilities.
Creditors were said to have preferred a sale to the Boscov and Lakin families, believing such a transaction would at least keep the chain in operation. Some feared private equity firm Versa would load up the acquisition with additional debt and risk a subsequent liquidation of assets, as happened recently with Mervyns.