TJX saw an opportunity to dump the bad stuff and expand their footprint into a younger mall consumer demographic when they offered to acquire Bob’s Stores. To execute the plan, the two need to pull off a Chapter 11 bankruptcy of Bob’s Stores to jettison the bad leases and much of the debt. The action is designed to preserve the Bob’s Stores name and cache with the coveted younger males that steer clear of most stores under the current TJX umbrella. The capital and logistical support of the new parent is expected to put Bob’s right back in the fight for athletic footwear and apparel dollars in the Northeast – and perhaps beyond.

We won’t know for sure until Tuesday if they can pull off the plan.

The acquisition process that worked like a charm for Callaway’s takeover of Top-Flite Golf Company –- except for a failed bid by TM-aG – almost didn’t work so well for TJX, the parent of the Marshall’s and TJ Maxx close-out chains.

After TJX was granted “stalking horse” status in the bidding process, which included a $3.5 million break-up fee if they didn’t win the auction (something even Callaway couldn’t pull off), a joint venture fly-in-the-ointment team led by Dick’s Sporting Goods posted a bid that then won approval late Wednesday by the Bob’s Stores creditor’s committee.

The winning bid had to be approved by Judge Louis Konerich of the U.S. Bankruptcy Court, and after arguments from both sides Thursday, the Dick's action appeared to fail. Dick's issued a statement Friday morning that they were NOT the winning bidder in the Bob's Stores auction although court documents still list the Dick’s consortium as the winning bidder.

The judge apparently moved against the wishes of the creditors committee.

What we know now is that TJX had a stalking horse bid of $100 million, or $77 million net . Presumably, a winning bid would need to be at least that amount plus the break-up fee to win. The Dick’s bid that was selected by the creditors committee is reported to be in the $98 million range.

While an apparently lower bid, the structuring of Dick’s deal apparently held greater appeal for the creditors because they would have reportedly netted $65 million more from the bid than the original TJX deal. The TJX bid apparently has a number of dilutive aspects to it, including inventory valuation and the extent of debt assumption, according to one source. The net-net is that the Bob’s estate would see only $35 million in proceeds from the original TJX deal.

Dick’s, which was partnered with Hilco Trading Co. and Gordon Brothers Group LLC, pitched a plan that would have reportedly seen unsecured creditors receive approximately 75% of their claims. The consortium bid did involve closing more stores, with Dick’s estimated to keep 16 of the 36 current Bob’s stores. Liquidating the inventory in all stores was expected to net the unsecured creditors more dollars.

Dick's Sporting Goods’ partners were expected to sell the leases for the other 20 stores and liquidate the inventory for the entire chain. Those sales were expected to start this weekend. The judge had instructed the winning bidders to start going-out-of-business sales immediately and to conclude the process by March 15.

However, the twist seemed to come when the judge apparently asked the people representing Bob’s Stores which deal they preferred and TJX seems to be the choice.
“We're not happy about it,” said an attorney for unsecured creditors in one published report.

The report posted late Friday at thedeal.com said “a series of contingencies attached to the Dick's Sporting Goods bid that may have held up the process”. Evidently, the Hilco and Gordon Bros. liquidation plan for the Connecticut stores didn’t work for certain officials in that state.

The issue appears to be with a process called “augmentation”, according to the report, where liquidators conduct going-out-of-business sales, but include other inventory in the sale. The practice is evidently illegal in Connecticut.

A source quoted in the report at thedeal.com said “these liquidators tend to add inventory similar to the stock in the stores that are being liquidated. Customers, as a result, would be able to find inventory that might not ordinarily have been there”.

“It enhances the value to the estate and for the customers,” the source said in the report.

The report also said the Bob’s team also favored TJX because it “had more familiarity with the landlords or the owners of the real estate that Bob's Stores occupies”.

TJX intends to keep 31 of the 36 stores.