agreement to acquire Active Ride Shop,
which is reorganizing in bankruptcy proceedings. According to court papers filed in the U.S. Bankruptcy Court of the Central District of California, Zumiez will pay as much as $7.2 million in cash,
depending upon the outcome of Zumiez's valuation of inventory and determination
of number of stores to acquire.
Zumiez has expressed interest in 20 of the 21 Active Ride
Shop stores. The final bid will be filed on June 22.
Under the formula, Zumiez would purchase all of Active's
inventory for less than market costs, as well as pay $100,000 per store
acquired. As March 30, Active Ride Shop's inventory was valued at $5.2 million.
Active Rid Shop expects to determine the market value of its inventory by June
10..
Finally,the purchase price also includes the assumption of gift
card certificates up to $1.3 million, with total consideration to be adjusted
if gift card liability is in excess of $1.3 million.
Zumiez has also requested a break-up fee of $250,000 if the
deal is not consummated. The deal is subject to bankruptcy court approval and
an court auction in which other bids will be presented.
Zumiez operates 350 stores in 31 states.
The
filing also shows that Active Ride Shop, founded in 1989, lost $7.7 million on
sales of $59.9 million in its year ended March 31, 2009. In the prior year,
the loss was $2.1 million on revenues of $61.8 million. The bankrtuptcy filing
was blamed on over-expansion and market saturation.
The filing also noted that Active Ride Shop had
been actively marketing its company for
sale since August 2008. In March 2008, it hired PCG Capital Growth to serve as
its investment banker to find a buyer. PCG
had contacted 80 potential buyers,
including 14 strategic buyers and 66 private equity firms but no purchase
agreement was reached. Phoenix Group, a
financial advisor hired as part of
bankruptcy proceedings, has also
entertained offers but only two
offers arrived, including Zumiez.
