Nearly 90 days after it was named the successful bidder for 27 Kings and Balducci’s stores at a U.S. Bankruptcy Court auction in New York, Acme Markets received clearance from the Federal Trade Commission (FTC) to complete the $96.4 million deal.
The FTC allowed all 27 stores that Acme purchased to remain intact and the deal is formally expected to close by the end of January. It is expected that Acme Markets, a division of Albertsons, will continue (for now) to operate the 19 Kings and eight Balducci’s stores as a separate division with the upscale regional chain operating from its Parsippany, NJ headquarters and with most of its approximately 125 headquarters associates becoming Acme employees.
However, sources told us that Acme will review all aspects of the deal and, after analysis, changes are likely in the June-August period. And unlike the phase-in protocol that was originally planned where Acme was going to purchase and convert about five stores a week over a five-week period, the Malvern, PA-based chain will now acquire all 27 stores at the time of closing and all stores will remain open and continue to carry the Kings and Balducci’s banners (see the list of stores that Acme is acquiring and the five stores that KB US Holdings is looking to sell below).
To review the course of events that led up to the FTC ruling, let’s begin on August 23, when Kings/Balducci’s owner KB US Holdings (part of Qatar-based GSSG Capital), filed for Chapter 11 bankruptcy protection.
At that same time, it was announced that New York private investment firm TLI Bedrock, which offered $75 million for the regional chain and was deemed best bidder at the time, was officially granted stalking horse favorable status by the U.S. Bankruptcy Court (Southern District of New York) prior to a formal auction of the retailer’s stores.
TLI Bedrock, which had a 30-day window of exclusivity to negotiate with Kings/Balducci’s five UFCW labor unions (Locals 342, 360, 371, 1464A and 1500) that began on July 13 to hammer out potential changes in existing labor contracts and pension funds, failed to reach agreement. TLI Bedrock termed the bargaining as an attempt to “modify a few discreet, minimal and limited” aspects of their labor agreements. The unions saw it differently especially when the hedge fund tried to create a new annuity-driven pension plan in an attempt to especially separate itself from the large shortfall in its largest plan with UFCW Local 360.
Union officials told us that despite the significant shortfall in the Local 360 plan, they were wary of a new owner that was seeking more than “moderate” change. One union official also said that he was not confident that another new private equity owner without supermarket experience was capable of leading Kings and Balducci’s (prior to KB US Holdings, the retailer was controlled by New York investment firms Angelo Gordon & Co and MTN Capital). About 1,900 of the retailer’s approximately 3,000 associates are unionized.
At the formal auction, which was held virtually on October 14, Acme stepped up and outbid TLI Bedrock by a substantial margin and was awarded the 27 stores it bid on (there were originally 34 stores in the entire lot, but seven stores were not part of the auction. KB Holdings is seeking buyers for those stores). A key reason for Acme’s interest was the relationship that it and Kings had with the United Food and Commercial Workers. In particular, one UFCW Local (360) whose members are part of a multi-employer pension plan that is currently about $60 million underfunded. The only two retailers that remain in that plan are Kings and Acme (other retailers that have gone out of business or sold their stores were also previously part that plan). If TLI Bedrock were to acquire Kings/Balducci’s and negotiate a new separate plan (which the hedge fun tried to do), Acme would be the only retailer supporting that pension fund with nothing to show for it.
With the acquisition, Acme adds an additional 27 stores to its 175 Mid-Atlantic store base. However, there will be challenges, including purchasing a retailer that, because of substantial debt, has been unprofitable despite strong retail sales across the industry that have been aided by the impact of COVID-19 shopping habits. In the 52-week period ended July 20,2020, Kings/Balducci’s posted an $8.6 million loss on sales of $590 million.
Kings Food Markets That Acme Will Acquire
Boonton, NJ
Chatham, NJ
Cresskill, NJ
Florham Park, NJ
Garwood, NJ
Hillsdale, NJ
Hoboken, NJ (Shipyard Lane)
Livingston, NJ
Mendham, NJ
Midland Park, NJ
Morristown, NJ
Short Hills, NJ
Summit, NJ
Upper Montclair, NJ
Verona, NJ
Whitehouse Station, NJ
Garden City, NY
Old Greenwich, CT
Balducci’s Food Lovers Markets That Acme Will Acquire
Alexandria, VA
Bethesda, MD
Greenwich, CT
McLean, VA
Rye Brook, NY
Scarsdale, NY
Westport, CT
Baltimore, MD (To-Go)
Stores That KB Holdings Is Attempting To Sell
Bernardsville, NJ
Hoboken NJ (River St.)
Maplewood, NJ
Ridgewood, NJ
Warren, NJ