Despite reaching a deal with a group of liquidators to become the stalking horse bidder in a planned bankruptcy auction, Gander Mountain said it remains in talks with strategic investors interested in buying the retailer on a going-concern basis.
The hunt & fish specialist, which filed for bankruptcy protection on March 10, reached an agreement with a joint venture comprised of Gordon Brothers and Hilco Merchant Resources to purchase substantially all of its assets.
Gordon Brothers and Hilco will become the stalking horse bid for an upcoming auction. The stalking horse bid sets a minimum baseline for others to submit bids. The bid arrived late. When the retailer first filed for bankruptcy, the deadline for securing a stalking horse bid was set for March 23.
The deadline for others to submit bids is April 24, according to court papers filed in U.S. Bankruptcy Court District Of Minnesota.
“The agreement satisfies one of the company’s planned milestones and ensures operational continuity necessary to support a successful sale,” said Gander Mountain in a statement. “Gander Mountain believes it has substantial market value to strategic buyers and that its agreement provides a competitive baseline to evaluate subsequent offers and maximize value to its stakeholders. The company and its advisors remain in discussions with a number of interested parties that are engaged in due diligence in an effort to finalize proposals, offers and bids.”
In late January Houlihan Lokey was engaged by Gander Mountain to help explore potential offers. At the time of the initial filing, non-disclosure agreements had been signed by a number of strategic and financial investors and due-diligence sales discussions have been conducted.
The auction will occur April 27 assuming at least one other qualified offer arrives. The court hearing on the sale would then take place on May 1 with the closing aimed for May 15.
So far, Gander Mountain has received court approval to hire Tiger Capital Group and Great American Group to liquidate 32 of its 160 stores. Those liquidation sales are ongoing.
According to court documents, Gordon Brothers and Hilco have agreed to pay 91.0 percent of the aggregate cost value of merchandise of inventory as of April 13 as part of a “Guaranty Percentage.” The inventory is from the 128 stores not already undergoing liquidation sales. The “Guaranty Percentage” has been fixed based upon the Gander Mountain’s representation that the aggregate cost value of the merchandise included in the sale is not less than $390 million and not greater than $430 million.
As of January 28, consolidated inventory was listed on Gander Mountain’s balance sheet at a value of $583 million. Sales in the year ended January 28 were $1.32 billion.
If the joint venture’s bid is topped and Gander Mountain goes with an alternative offer, Gordon Brothers and Hilco will receive a break-up fee for their efforts in forming their offer equal to the lesser of $2 million or 1 percent of the cost value of inventory on April 13.
When it filed for bankruptcy, Gander Mountain said it was aiming for an expedited going-concern sale of the majority of its stores with a goal of completing the sale within approximately 60 days.
In an affidavit filed at the time of the bankruptcy filing, Tim Becker, who was appointed the retailer’s chief restructuring officer in early January, said Gander Mountain “must act quickly to preserve the value of a core portion of the debtors’ business that operates at a sufficient level to enable a successful sale process, preserve jobs, vendor and landlord relationships and emergence from bankruptcy. The debtors must accomplish this in an environment of unprecedented volatility in retail, which has created an extremely challenging operating environment, adversely affecting employee morale and the attractiveness of a career in retail generally, while at the same time maximizing proceeds from ‘store closing’ sales to be conducted at a time when the market has seen unprecedented number of recently completed or planned liquidation sales of similar sporting goods, apparel, and footwear retailers.”
The company blamed its bankruptcy on the shift in retail to online selling, heightened competition from other sporting goods retailers, apparel and soft line vendors opening their own stores and an overall promotional retail climate. It was also “undermined” by a heavy debt load caused by being taken private in 2010 by Gratco, a holding company controlled by Gander Mountain Chairman and CEO David Pratt, and Holiday Stationstores, a gas-station retail operation controlled by Minnesota’s Erickson family.
Photo courtesy Gander Mountain
