Chesterton Tribune



Jewel bids $100M for Strack stores including Chesterton

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The bankrupt Central Grocers Inc. has entered into a stalking-horse agreement with Jewel Foods Stores Inc. to acquire 19 Strack & Van Til stores as “going concerns.”

Central Grocers filed that stalking-horse agreement on Saturday in the U.S. Bankruptcy Court for the District of Delaware.

The deal would be worth $100 million: $70 million for the 19 stores themselves, plus $30 million for their inventory.

Stores included on the list of 19: the Strack & Van Til location at 1600 Pioneer Trail in Chesterton; two other Strack & Van Tils in Valparaiso; the Town & Country in Valparaiso; and the Town & Country in Portage.

According to a statement released today by Central Grocers, “The 19 stores will be sold as going concerns. Jewel-Osco has agreed to interview and extend offers of employment to substantially all of the employees of the stores that are part of the transaction.”

Also, according to Saturday’s filing, Jewel-Osco has agreed to “negotiate in good faith with the affected unions representing covered employees to achieve collective bargaining agreements and other labor agreements that are acceptable to (Jewel-Osco) and consistent with the terms of its current agreements with the affected unions.”

Stalking-horse agreements are used by debtor companies to establish a minimum acceptable bid at auction. In exchange for the stalking horse’s entering into such an agreement, a debtor company undertakes to offer the stalking horse certain protections. Specifically, under its agreement with Jewel-Osco, Central Grocers will do the following if another party out-bids Jewel-Osco in an auction scheduled for June 26:

* Pay Jewel-Osco a “break-up fee” equal to 3 percent of the purchase price of the stalking-horse package.

* Reimburse Jewel-Osco up to $500,000 for “reasonable and documented costs and expenses incurred” in connection with the agreement.

Central Grocers noted in Saturday’s filling that, in December, it contracted with Peter J. Solomon Company (PJSC) LLC to implement a “comprehensive marketing process” to sell the company. As part of that process, PJSC contacted 42 entities, including 16 potential strategic buyers and 26 financial buyers, from who it subsequently received 20 responses. To those 20 PJSC submitted confidential information regarding Central Grocers’ business. Six of those 20--including Jewel-Osco--ulimately “expressed serious interest in consummating a transaction.”

“In reaching the decision to process with the stalking-horse bid,” Central Grocers said, “the company determined that, of all the bids received by the company before it became necessary to execute a binding asset purchase agreement, (Jewel-Osco’s) stalking-horse bid offered a combination of the best value for the stalking-horse package and the greatest level of deal certainty.”

Not included in the stalking-horse agreement: Central Grocers’ distribution center in Joliet, Ill.

Meanwhile, Central Grocers indicated in its Saturday filing that, in a separate motion, it’s seeking approval of debtor-in-possession financing which, along with cash collateral, “will provide them with sufficient runway to consummate value-maximizing sale transactions.”

Nevertheless, Central Grocers added, “it cannot be over-emphasized that time is of the essence,” and that a “timely sale” of its assets is “the best way to avoid a fire-sale liquidation,” which it characterized as “worst-case scenario for all of the debtor’s economic stakeholders, including for thousands of employees who likely would lose their jobs as a result.”

Strack & Van Til is the largest employer in Northwest Indiana, with a workforce of 4,250 and a monthly gross payroll of $8 million. It has total assets (book value) of $183 million and total liabilities of $141 million, with annualized sales in 2016 of $905 million, or about 51 percent of Central Grocers’ sales volume last year.

Last week, in its initial Chapter 11 petition, Central Grocers attributed its dire financial straits to a combination of factors, including online competition and “innovative companies focusing exclusively on food delivery”; consumers’ changing tastes and demand for a “gourmet” shopping experience; and plummeting food prices which have prompted grocery retailers to engage in “aggressive price wars.”






Posted 5/15/2017




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