Acme, S&S, Key, Wakefern Remain Leading Bidders For A&P Stores

As expected, the action has heated up regarding the sale of A&P stores as the Montvale, NJ chain sells and closes stores under Chapter 11 bankruptcy.

In addition to the original “stalking horse” bidders – Acme Markets/Cerberus, Stop & Shop/Ahold USA and Key Food – other retailers and real estate entities have bid on the stores.

All told, A&P disclosed that more than 100 bidders making 300 offers requested to be a part of the auction process. Since Acme, Stop & Shop and Key Food were granted “stalking horse” status by the bankruptcy court in August, Wakefern, Food Bazaar (Bogopa), Morton Williams and real estate developer Federal Realty Group have all gained preliminary approval to acquire A&P stores.

Of course, final approval can’t be granted until the Bankruptcy Court and A&P complete an auction process which was scheduled for October 1, 2 and 8.

Because of the size of Acme and Stop & Shop’s bids, the court has granted approval of their deals which were slightly altered from the original proposal.

Instead of acquiring 76 stores for $255.7 million, Acme has amended its package to 71 units for which it will pay $243.1 million. The five stores that were pulled from the original package are located in: Yonkers, NY; Millwood, NY; Bedford, NY; Croton-on-Hudson, NY; and Newark, DE. And, transfer agreement for the Super Fresh store in Gladwyne, PA has been adjusted. Sources said that landlord/leasehold issues were the cause for the store reduction.

Additionally, the high-volume (and very profitable) A&P store in Mount Kisco, NY has been dropped from the original Stop & Shop package because a higher offer was received than the $22 million Stop & Shop bid). That reduced Stop & Shop’s store count from 25 to 24 and lowered the deal price for the package from $146 million to $124 million. However, sources told us, at the October 1 auction, Stop & Shop upped its offer for the Mount Kisco unit to $25 million and came away with the prize.

And Key Food, which originally was given “stalking horse” status for 19 stores, then scaled that back to 17 units (due to environmental issues), ultimately made a deal for 16 supermarkets for $28.5 million.

As for the new bidders that were identified after September 17 (when all bids were due) Wakefern was the most aggressive, agreeing to acquire 12 stores for $40 million. Those stores are located in: Bethpage, NY and New Hyde Park, NY (both Pathmarks); Danbury, CT and Orangeville, NY (both A&Ps); a Waldbaums unit in Deer Park, NY; and seven Pathmark stores in the Philadelphia area (Brookhaven, PA; Upper Darby, PA; Wyncote, PA; Glenolden, PA and city supermarkets on Monument Ave, Aramingo Avenue and Oregon Avenue).

At presstime, Wakefern had not disclosed which members would be designated to own which stores (some could become SRS corporate units). There is also a possibility that ultimately those stores will utilize Wakefern’s core ShopRite banner as well as its alternate PriceRite or Fresh Market banners.

New York City-based Morton Williams Supermarkets (owned by Steve Sloan and Avi Kaner) were designated as lead bidders for three Food Emporium stores in Manhattan – 8th Avenue &  W. 50th Street ($7 million);1st Avenue & E.63rd Street; and 3rd Avenue & E. 72nd Street ($4.75 million).

Food Bazaar (Bogopa) was given “stalking horse” status for four metro New York stores for which it will pay $11.75 million. These supermarkets are located in Brooklyn, NY (Pathmark); Elizabeth, NJ (Pathmark); Fairview, NJ (A&P); and North Bergen, NJ (Food Basics).

Federal Realty is paying $6.35 million to gain control of a Pathmark store in Parsippany, NJ; a Pathmark unit in Bricktown, NJ and a Waldbaums supermarket in Melville, NY.

And just before we went to press, Mount Vernon, NY-based PSK Supermarkets (Phil Katz), Inc., which operates under the Foodtown and Freshtown banners, also bid on two stores for a total of $19.4 million, according to court documents. Those stores are the Waldbaum’s in Rocky Point, NY and a Pathmark in Manhattan (W. 145th Street).

Additionally, Morganville, NJ-based Dave-Marion Corp., the property owner of a shopping center in Marlboro, NJ, has bid $2.9 million for the lease of the A&P store in that center.

Landlords will play an integral role in the auction and post-auction process as they attempt to control potentially “dark” sites while also making side deals with interested food retailers who desire specific locations. Landlords are expected to also be active in making deals for prospective tenants for the more than 70 stores not bid upon at auction.

To recap, A&P received court approval to push back the auction dates (originally scheduled for September 24-25) in part due to the recent visit of Pope Francis to Manhattan. The auctions took place in the Manhattan offices of A&P’s law firm, Weil, Gotshal and Manges LLP

Earlier A&P announced it would close 25 stores by mid-October and told its approximately 26,000 store associates that all stores will be shuttered before Thanksgiving and all employees at its remaining stores will be terminated. Then on September 27, the bankrupt chain notified 319 employees at its Montvale headquarters (virtually all of its administrative staff) that they, too, would be riffed on November 23.

The once iconic merchant also asked the bankruptcy court to reject all union contracts, deeming it necessary to create an easier path to sell its stores, even to union operators (Acme, Stop & Shop, Key and Wakefern are all organized). U.S. Bankruptcy Court Judge Robert Drain said he would rule on that matter on October 16. Most industry analysts believe that at that time, after the auctions are completed, Judge Drain will agree to those contract rejections.

A&P also asked that the court approve a $5 million request for retention bonuses. That number was later reduced to $3.9 million, with the remaining $1.1 million set aside to bolster severance agreements for the organized clerks and meat cutters who work in the stores.

“I have an image in my head of 25,000 (A&P store associates) in a line,” said Judge Drain from his perch in White Plains, “I’m being asked to poke each of them in the eye and I don’t think its good business judgement.”

Drain seemed even more perturbed when he learned that A&P had established a $6 million trust fund to provide compensation for top executives. That “fund” was formed three months before the July 19 bankruptcy filing. Drain, who presided over A&P’s first Chapter 11 petition in 2010, suggested that A&P executives consider contributing money towards the associates’ severance fund to prevent the trust from “further being investigated”. And just before presstime, court documents revealed that the set aside for the trust fund was actually $12.6 million. Current A&P chairman Greg Mays received nearly $4.6 million in bonus payments and consulting fees. CEO Paul Hertz and chief restructuring officer Chris McGarry both received $1.5 million and each was paid a $225,000 bonus last year. Included in the court document were more payments made to current and former executives. Chief financial officer Tim Carnahan received $250,000 plus a $50,000 signing bonus; chief strategy officer Nirup Krishnamurthy was paid $250,000; and chief merchandising officer Eric Kanterman received $100,000 from the “trust.” Moreover, A&P-related officials Brian Fitzpatrick, Lou Giraudo and Terrence Wallock all received extra compensation from the trust fund and consulting firms headed by Mays, Wallock and Giraudo also received additional payments and expense reimbursements.

Beyond the auction, the court has scheduled several hearings – on October 9 bidders and labor unions can file objections to the auction’s store sales. A response to those objections will be heard on October 15, the day before a final sales hearing will be held.

A&P which already said it will close or sell all 296 of its stores and is expected to file a Chapter 7 liquidation petition by the end of the year or early next year.