Modell’s Sporting Goods and U.K.-based Sports Direct International PLC were identified by the Wall Street Journal Monday as the “bulk buyer” considering an 11th-hour bid for up to 200 Sport Authority store leases, intellectual property and e-commerce assets.
Sports Authority confirmed it was negotiating with a “bulk buyer” Friday in an objection filed June 17 seeking to block an order compelling it to sell the lease for its Honolulu store back to the landlord, Ward Gateway-Industrial-Village, LCC (Ward Gateway). Sport Authority, which is now conducting going-out-of-business sales at all of its 320 stores in U.S. Bankruptcy Court, said that while approved at a May 24 hearing, the sale would jeopardize a potential bid from an unidentified “strategic buyer” interested in acquiring the company’s leasehold interests in more than 100, and as many as 200, stores.
The objection says that the “bulk buyer” had expressed a desire to hire a substantial number of its employees, which could number in the thousands, if a transaction is ultimately consummated.
“It is my view that the Honolulu Lease is a fundamental asset for the Bulk Buyer, and absent its inclusion in the potential bid package, the Bulk Buyer would not be interested in operating in Hawaii,” said Rothschild Inc. Managing Director Bernard Douton in a statement supporting Sports Authority’s objection. “Furthermore, it is my view that in the event the Motion to Compel is granted, there is a significant risk that the Bulk Buyer will significantly reduce its proposed purchase price and limit the number of stores it seeks to acquire, thereby adversely affecting all interested parties, including a significant number of employees.”
While the bulk buyer had indicated interest in Sports Authority stores in Florida and Georgia and bid for Sports Authority’s intellectual property and e-commerce business, it was not among 39 landlords and other parties who submitted qualified bids for store leases at a May 16 auction. Of those bids, four were deemed successful at a May 24 sales hearing, including Ward Gateway’s bid for the Honolulu lease.
The bid called for Ward Gateway to pay Sports Authority $3.26 million to buy back the lease in exchange for Sport Authority paying $587,444 and agreeing to vacate the store by July 31.
Even as attorneys for Sports Authority and the landlord were hammering out an agreement ahead of a the May 24 sales hearing, Sports Authority said its senior management was meeting with representatives of the bulk buyer in Denver to discuss their bid.
When Ward-Gateway learned of the negotiations June 9, it filed a motion asking the judge to compel Sports Authority to sell it back the lease. In its objection to the motion, Sports Authority said that, “despite the Landlord’s accounts of the Debtors’ purported bad faith, the Debtors have complied with the Main Auction Bid Procedures throughout the sale process with respect to the disposition of the Honolulu Lease and the fulfillment of their fiduciary duty to maximize value for the estates and stakeholders.”
