WAYNE, N.J. -- Grand Union Co. here said last week it is scheduled to go to U.S. Bankruptcy Court Thursday to seek approval for the sale of 185 of its 197 stores to C&S Wholesale Grocers and a single store in New York City to New York University.
Pending that approval, C&S has already begun shopping some of those stores, with Shaw's Supermarkets, East Bridgewater, Mass., agreeing last week to buy 18 stores in Vermont and Connecticut.
Price Chopper, Schenectady, N.Y., told SN last week it is in discussions with C&S to buy some Grand Union locations, though a spokeswoman declined to specify how many the chain is interested in until a deal is signed.
Reports also surfaced last week indicating that Hannaford Bros., Scarborough, Maine, a subsidiary of Delhaize America, Salisbury, N.C., is also talking with C&S about some Grand Union locations. Hannaford representatives could not be reached for comment.
Grand Union said it is continuing to seek buyers for 11 unsold stores in the Northeast, a commissary in Newburgh, N.Y., and approximately 10 properties in the Southeast and Texas, where it operated stores during the 1980s.
In an interview with SN last week, Jeffrey P. Freimark, chief financial and administrative officer, said Grand Union hopes to finalize the sales to C&S and NYU by Jan. 15. He also said his company and C&S have formed administrative teams to make the transition of the 185 stores as smooth as possible.
C&S will pay $301.8 million for the 185 stores and a 45,000-square-foot nonfoods warehouse in Montgomery, N.Y., that Grand Union owns and that C&S already oversees as a third party; Grand Union said NYU will pay $24 million for the single New York store. C&S, Brattleboro, Vt., is Grand Union's principal wholesaler.
Grand Union has been operating under Chapter 11 since October, when it filed its third bankruptcy in five years. In connection with its plan to liquidate rather than restructure the company, Grand Union held an auction on Nov. 16 to sell off its assets, with C&S and NYU emerging as the only buyers out of a field of approximately 10 bidders.
C&S had previously indicated it plans to sell some of the 185 stores to other retail customers and to operate an unspecified number as corporate stores -- presumably under the Grand Union banner, since its purchase deal with Grand Union encompasses all assets, including intellectual assets, such as the right to the Grand Union name.
C&S officials could not be reached for comment last week.
Shaw's said the 18 stores it has agreed to buy from C&S include 12 in Vermont and six in Fairfield County, Conn. According to Bernie Rogan, a Shaw's spokesman, the chain has been interested in expanding its presence in Vermont, where it currently operates only two stores, with another under construction; it has 21 stores in Connecticut.
Shaw's, a division of J Sainsbury, London, uses C&S as a secondary supplier in Connecticut. The wholesaler has not been a supplier for the chain's Vermont stores, though Rogan said that could change with the addition of 12 more stores in the state.
"This acquisition closes a gap we have in the Vermont market very nicely," Rogan told SN. "And it also dispels the rumors that we will be leaving Connecticut."
Freimark told SN that Grand Union filed a recommendation with the bankruptcy court last Monday to ratify the deals with C&S and NYU; the court is scheduled to rule on that recommendation Thursday, he explained.
He said the company expects the sales to be finalized by Jan. 15, "although that could be delayed somewhat by Hart-Scott-Rodino [antitrust] considerations."
According to Freimark, the auction attracted more than 100 people, including representatives of C&S and NYU, although he declined to say how many entities actually took part in the bidding process.
Grand Union had reached a definitive agreement with C&S prior to the auction for the 185 stores and the warehouse. Freimark said that agreement was used as a stalking-horse contract.
"That approach made sense, in our view and that of our legal and financial advisers, because it established a floor for the bidding process," he explained. "In hindsight, we believe it was the right thing for us to do."
The auction proceeded with each of the 197 stores being put up for bidding, Freimark said, noting that some entities had submitted indicative bids on individual units or groups of stores prior to the start of the auction, with the right to change their bids as the auction progressed.
"Once the auction was over and we had access to all the bids, we determined that the C&S contract was the best deal on the table in terms of the highest and best offer to recommend to the [bankruptcy] court," Freimark said.
He said the store NYU is buying is located in Greenwich Village. The university plans to develop the air rights above the store for a dormitory "and to seek a retailer to continue operating the store on the ground floor," he added.
Regarding the 11 unsold properties, Freimark said, "We are continuing to vigorously market those leases."
He said Grand Union has three options for those stores -- "to sell them; to shut them down and reject the leases; or for C&S to decide to acquire additional stores themselves or to come up with third-party acquirers."
According to Freimark, Grand Union's deal with C&S includes an interim operating agreement "to effectuate a smooth transition beyond the closing date."
He said teams from Grand Union and C&S began meeting last week. The Grand Union team includes "people within our organization who are responsible for all functions, including operations, merchandising, accounting, finance, human relations and information technology," Freimark said.
He said he is uncertain what kinds of layoffs may be required at the administrative level of Grand Union before the deal closes. "It would be impossible to talk about that at this point until we begin to work our way through the transition," he explained.
The situation is a little clearer at store level, Freimark said, "because the fact C&S is taking 185 of the 197 stores means those stores will continue as ongoing operating entities, and we view that as a very positive thing for store people.
"But it's still too early to make definitive commitments about the stores. C&S will be involved in those commitments, and they must still visit the stores and make certain determinations. But it's fair to say the stores will require good people, and we have a significant number of good people working for Grand Union."
