Haggen gets OK of $56 million stalking horse bid for 28 more stores

By Mark Reccek

Bethlehem, Pa., Oct. 20 – Haggen Holdings LLC received court approval of an agreement to sell 28 stores and related assets to Smart & Final Stores LLC for $56 million in cash, according to an order issued Monday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, Haggen also entered into an agreement to sell eight stores to Gelson’s Markets for $36 million, plus additional consideration to be paid for pharmacy inventory.

Gelson’s and Smart & Final will serve as the stalking horse bidders in court-supervised auctions.

If Gelson’s is not the high bidder for the assets it has agreed to buy, it will receive a $1 million break-up fee and reimbursement of up to $700,000 of its sale-related expenses. Meanwhile, Smart & Final would receive a 3% break-up fee and reimbursement of up to $1.5 million of its expenses if it is not the high bidder for the assets it agreed to buy.

The proposed Smart & Final transaction is scheduled to close in the fourth quarter, subject to bankruptcy court and other customary approvals. The Gelson’s sale must close by Dec. 31, according to a previous motion.

Competing bids for both sales are due by 5 p.m. ET on Nov. 2. The auctions would be held on Nov. 9.

“The global bidding procedures are reasonable and appropriate under the circumstances of these Chapter 11 cases, were negotiated in good faith and at arms’ length by the debtors and stalking horse bidders, and represent a fair and appropriate method for maximizing the debtors’ estates,” the order said.

According to a previous Smart & Final press release, the transaction would result in Smart & Final assuming the leases and acquiring associated assets for 27 closed stores in central and southern California and one closed store in Las Vegas, which have most recently been operated as Haggen banner stores.

The company plans to convert the stores to its Smart & Final Extra! store format, including investment in store fixtures and equipment, decor and signage and infrastructure upgrades, the previous release said.

Smart & Final also previously said it intends to fund the transaction and related investment with existing cash and availability under credit facilities.

The Smart & Final store conversion is expected to begin in the fourth quarter of 2015 and be completed in the second quarter of 2016.

The sale hearing is scheduled for Nov. 13 if the stalking horse bidder’s is the only qualified bid. If more than one qualified bid is received, the sale hearing will be held Nov. 24.

Haggen, a Bellingham, Wash.-based supermarket company, filed bankruptcy on Sept. 8. The Chapter 11 case number is 15-11874.

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