The 10-week standoff between Market Basket’s Class “A” controlling shareholders led by Arthurs S. Demoulas and supporters of ousted CEO Arthur T. (“Artie T.”) Demoulas, leader of the company Class “B” holders, officially ended on August 28. That’s when “Artie T.’s.” group announced it had acquired the 50.5 percent stake from the Class “B” holders, ending protracted and sometimes bitter negotiations between the families (Arthur. S. and Arthur T. are first cousins). The contentiousness between the families of Mike and George Demoulas (now both deceased), who acquired the company from their father, Athanasios in 1954, first reared its legal head in 1990, and it was a full decade before the Massachusetts Supreme Court finally ordered control of the company (but not the board at that time) and $206 million to the family of George Demoulas, who died in 1971.
While the two factions continued to disagree and litigate about several issues (real estate, profit sharing) over the past decade, much of that was done behind the scenes and in such a way it did not disrupt the flow of daily business which continued to flourish under Mike Demoulas (who died in 2003) and then his son, Arthur T. Demoulas who had expanded the company to 71 stores and annual sales of approximately $4.3 billion.
Then on the morning of Monday, June 23, the fighting became very public, when the Class “A” holders fired “Artie T.” and two of his top lieutenants, Joe Rockwell and Bill Marsden. “Artie T.” had actually lost control of the board in June 2013 (despite not having the majority stake since 2000) but he remained chief executive, (a position he had held since 2008), was Market Basket’s largest individual shareholder and was viewed as an executive who was greatly admired by the company’s 25,000 associates.
Everything changed after that “Black Monday.” Employees pushed back and pushed back hard. In the next 10 weeks, the Tewksbury, MA retailer, which had installed two outside retail executives (Felicia Thornton and James Gooch) as co-CEOs, faced a series of boycotts, rallies and work stoppages from a large group of associates sympathetic to Arthur T. Demoulas. Their collective effort essentially shut down and choked Market Basket’s ability to operate. Inventory seemingly disappeared in a few days and was not replenished (because of the slowdown at its distribution center) and store employees urged those few shoppers who visited the supermarkets not to shop there until “Artie T.” was reinstalled. The ferocity of their actions ultimately led to a significant consumer boycott of the stores as well as favorable wide media coverage sympathetic to “Artie T.’s” side.
Though Market Basket was losing tens of millions of dollars a day, a deal could not be reached, even with the political influence of the governors of Massachusetts and New Hampshire. Finally, after yet another round of intense bargaining, the two sides reached an agreement at 11:15 p.m. on August 28.
However, control of one of the industry’s most admired retailers will come at a price. For the acquisition of the Class “B” shares, “Artie T.” will reportedly pay upwards of $1.5 billion, of which $500 million will be financed by an unspecified private equity firm.
During the sales process (which is expected to take several months to close) Thornton and Gooch will stay on board, but “Artie T.” has operating control of the company, effective immediately. Also occurring immediately was the restoration of employment for those key executives who were fired and those who resigned in support of “Artie T.”
Perhaps surprisingly, Market Basket was able to replenish most of its store inventory within the first week and, according to many sources, business was booming virtually from the re-start.
“This whole episode still seems surreal,” said one veteran food broker who’s called on Market Basket for more than 30 years. “Power and greed of monumental proportions almost caused one of the best merchants in our business to collapse and then, almost like flipping the switch, it’s back again to a point where sales might ultimately exceed previous levels. Certainly there are going to be some deep scars and long-term questions left by this, but it’s amazing how efficiently and quickly ‘Artie T.’ and his group were able to get things rolling to this level again.”
Some of those questions might be: What role will private equity have in the company’s future direction? How will the newly added debt affect Market Basket’s ultra-low retailing pricing model? And with “Artie T.” now totally in control, what might be Market Basket’s future perpetuation plan?
As noted by our broker source, business has been strong since “Artie T.” regained control three weeks ago. Many suppliers noted that they are back in lockstep with Market Basket’s needs and are happy and relieved they are able to conduct normal business with them again. At this point, the regional chain has not changed its everyday low pricing structure and is also maintaining a hard four percent discount on all items, a program that was unveiled in early January 2014 and slated to continue for the entire year.
Additionally, five new Market Basket stores, whose progress was halted even before “Artie T.” was fired, are back on track. Stores in Revere, MA and Attleboro, MA are essentially built and expected to open before the end of the year, while other planned new units are still slated for Waltham, MA, Littleton, MA and Athol, MA.
And if you’re still baffled about how one man’s passion and policies could endear him to thousands of associates, you might understand more clearly in the following words delivered by Arthur T. Demoulas when he greeted Market Basket’s associates upon his return:
“You are simply the best. As I stand before you, I am in awe of what you’ve all accomplished. It is an example you have all set for so many people across the region and across the country. There is very little I can ever add to your brilliant work, your extraordinary display of loyalty and the power of your enduring human spirit over the past six weeks. You taught everybody that Market Basket is a place where respect, honor and dignity is a way of life. You displayed your unwavering dedication and desire to protect the culture of your company. You have demonstrated that at this organization, here at Market Basket, everyone is special. You have demonstrated that everyone has a purpose, everyone has meaning, that no one person is better than another, that no one person holds a position of privilege. We are all equal.”
