C&S Wholesale Grocers emerged the winner in the contest to acquire bankrupt wholesaler Associated Wholesalers, Inc. in a marathon bidding battle with rival Supervalu. The affirmation announcement was made by U.S. Bankruptcy Judge Kevin J. Carey at a hearing held in Wilmington, DE on October 29. The deal is scheduled to close on November 11.
C&S, the country’s largest wholesale grocer, was granted “stalking horse” status to acquire the assets of AWI and sister wholesaler White Rose at the time AWI first sought Chapter 11 protection on September 9
The winning bid was valued at $288.1 million (of which $5.4 million was carved out when it was agreed that AWI will retain its Co-Op Insurance agency and several real estate properties). It was also revealed that at the auction, which was held on October 24 and 25 at Saul Ewing LLP’s (AWI’s attorney) office in Philadelphia, lasted 15 hours and 23 rounds between the two authorized bidders – C&S and Supervalu. Supervalu’s final bid was $284.6 million.
The Keene, NH based privately-held wholesaler’s final bid was approximately $95 million more than its original “stalking horse” offer. The acquisition will include three distribution centers – in Robesonia, PA and York, PA (AWI) and another in Carteret, NJ (White Rose) – four Nell’s supermarkets in Southern Pennsylvania as well as AWI/White Rose’s 2,200 employees.
Saul Ewing’s Mark Minuti, the lead attorney in the courtroom at the October 29 hearing, declared that the process yielded a “tremendous result.” He added that in addition to the increased price, other improvements were agreed upon that would enhance the acquisition for all parties.
Also testifying at the two hour hearing was Doug Booth, a partner in investment advisory and merchant banking firm Carl Marks Advisors, who has been serving as chief restructuring officer for AWI during the Chapter 11 process. Booth noted that once the secured lenders are paid, there would be approximately $85 million in cash available that will be targeted for claims related to administrative expenses, creditor set-off claims and Section 503 (b)(9) issues. Section 503 (b)(9) of the U.S. bankruptcy code allows vendors to assert an administrative expense claim for the value of goods sold and delivered to, and received by, a customer in the ordinary course of business within 20 days of their customer’s bankruptcy filing.
Until the transaction closes, AWI and White Rose will continue to operate independently of C&S. AWI stated that both the White Rose and AWI businesses intend to continue operating in the ordinary course of business.
Matt Saunders, president and CEO of AWI said, “We are pleased to receive court approval for the sale of AWI and White Rose to C&S. The auction process was robust and competitive and we believe that the winning bid from C&S is in the best interest of AWI and its stakeholders. C&S shares AWI’s commitment to providing customers and independent stores great deals on products and on helping them grow their businesses. AWI will further enhance C&S’s position as the leading wholesale grocery supply company and we look forward to completing the sale. I would like to thank AWI and White Rose employees whose continued hard work and dedication enabled us to move through this process.”
“We are excited to have the opportunity to partner with Associated Wholesalers’ and White Rose’s strong team and customer base of independent grocers,” said Rick Cohen, C&S chairman and CEO. “My grandfather founded C&S to supply independent retailers, and while we now proudly service grocers of all sizes, this transaction will give us an even greater capacity to provide the unique services required by independents and regional chains.”
“Our first priority is to provide exceptional service to the customers, especially as we approach the holiday season,” said wholesale industry veteran Christopher Brown, who joined C&S about six weeks ago as senior VP of independent sales. “We are committed to maintaining and enhancing the services provided to the numerous retailers who have relied on AWI and White Rose for their grocery supply needs.”
Now the battle will accelerate as to who will supply the more than 2,000 Mid-Atlantic stores that AWI and White Rose serviced prior to the bankruptcy filing. Clearly, C&S has an advantage with its previous stalking horse status that has now been converted into a final asset purchase. Parts of those assets include joint lease ownership of stores with several of AWI’s largest customers and the fact that many of AWI’s member stores are tied into the company’s front-end IT systems.
On a large scale, only Krasdale Foods, the White Plains, NY wholesaler which utilized White Rose for dairy and frozens, has exited (opting to be supplied by Bozzuto’s), but many other White Rose and AWI customers have utilized other distributors as secondary suppliers because of diminishing service levels at AWI and White Rose distribution centers.
Once the busy holiday period is over, expect more decisions as to whether retailers will remain with C&S (and continue to be serviced from the existing primary depots in Robesonia and Carteret) or switch to other wholesaler such as Bozzuto’s, Supervalu, Burris and even MDI (Concord, NC) as their primary supplier.