DALLAS -- The ultimate disposition of Fleming here will be determined at an auction scheduled for Thursday in New York.
Results of the auction will not be disclosed until next Monday, when the U.S. Bankruptcy Court overseeing Fleming's Chapter 11 proceedings determines which bids offer the best returns for Fleming. Fleming has been operating under Chapter 11 bankruptcy protection since April 1.
Formal bids were due by today at the offices of The Blackstone Group here or at Kirkland & Ellis LLP in Los Angeles, with each potential bidder granted due-diligence access to Fleming's books.
The auction will exclude all assets related to Core-Mark International, Fleming's convenience store segment, which operates as a separate entity. Fleming said it is exploring strategic alternatives for that business, "including the possibility of a stand-alone reorganization."
Although Fleming has signed a definitive agreement to sell virtually all its grocery distribution assets to C&S Wholesale Grocers, Brattleboro, Vt., the company acknowledged in court documents that C&S is serving as a stalking horse to help set a base price for Fleming's assets.
C&S has agreed to pay $400 million for those assets, although court documents said it has the option to designate one or more third-party purchasers to acquire some assets directly from Fleming.
Fleming is offering its grocery distribution business for sale as a single unit, according to court documents. "[Fleming] will consider offers for less than the entire business if these offers can be aggregated with two or less bids... to comprise a single qualified bid for all or substantially all of the wholesale distribution business," the documents said.
If the auction ends with a purchaser other than C&S as the winning bidder for the entire company, C&S will be entitled to a breakup fee of $15 million, encompassing $11 million, or 4% of its purchase price, plus $4 million to reimburse it for expenses.
"C&S' willingness to commit to the sales transaction, to continue to perform the activities necessary to consummate the transaction, and to serve as a 'stalking horse' against which other prospective purchases will be compared... represents a significant contribution to the [Fleming] estates," according to Laura Davis Jones, an attorney with Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C., Wilmington, Del., which represents Fleming.
"As a result, by agreeing to pay the breakup fee and expense reimbursement, [Fleming] ensures that [its] estates will have the benefit of C&S' initial offer without sacrificing the potential for interested parties to submit overbids."
The bids submitted by today will be sealed until Thursday, when the auction is scheduled to take place at 10 a.m. at the offices of Kirkland & Ellis in New York.
