UTICA, N.Y. -- Victory Holdings here, parent of Victory Markets, has agreed to acquire all 26 Almacs stores in Rhode Island and Massachusetts.
The selling price is about $30 million, trade observers told SN.
Almacs, based in East Providence, R.I., has been operating under Chapter 11 bankruptcy protection since Aug. 6, 1993. A Los Angeles investment group, Leonard Green & Partners, is the majority shareholder in Almacs.
Victory Markets operates 72 Great American Food Stores in upstate New York.
As part of the proposed deal, an amended plan of reorganization reflecting the pending acquisition has been submitted to U.S. Bankruptcy Court in Providence. If that plan is accepted at a hearing scheduled for Sept. 30, it will be submitted to creditors for their acceptance.
Additionally, Wetterau, a subsidiary of Supervalu, Minneapolis, has agreed to remain Almacs' primary supplier. It will accept $7.2 million in five-year notes for prior liabilities. Wetterau also is a minority shareholder in Almacs.
Almacs' annual sales are about $260 million and Victory has sales volume of $300 million, according to officials of the two companies.
Aaron Malinsky, president of Victory Holdings and chairman and chief executive officer of Victory Markets, said Victory's aim is to prevent the "devastating impact" a liquidation would have on thousands of Almacs jobs.
"We are committed to rebuilding the great Almacs franchise that unfortunately got caught in a crunch of competition, debt and
the devastating recession that hit Rhode Island," he said.
Malinsky said his plan includes selective store improvements and the use of the neighborhood-store concept that Victory has successfully used in the past. Victory would continue to operate the 26 stores under the Almacs banner and would retain its store managers and store-level employees, he said.
However, Malinsky said Victory would eliminate as many as 105 administrative jobs when it transfers Almacs' headquarters from the existing East Providence offices to Victory's offices here.
Thomas E. Ireland, Almacs chairman, president and CEO, expressed regret over the job eliminations.
"Our management and administrative staff have been aware of this possibility for several weeks, and yet they continue to work hard to run the company so that Almacs' stores could have a future," he said. Upon completion of the acquisition, Victory Markets would enter into a management agreement with a new company, New Almacs, and Malinsky would become chairman and CEO of New Almacs.
In addition, direct supervision would be assumed by a team of Almacs and Victory supervisors and merchandisers based in a new office in the Providence area. That office would replace a buying and merchandising office Victory opened last November in Boston.
Bob Lupo, a high-yield analyst at PaineWebber, New York, said Victory's interest in acquiring Almacs indicates a more aggressive position on expansion. "Executives there apparently believe they can make money from the downsized Almacs operation," he said. The two companies will probably coordinate their buying, which, he said, could improve overall margins.
Terms of the amended plan of reorganization include:
· Almacs lender bondholders would receive an $11 million note for their $104 million in debt. They would commit to an investment of $4 million in the new company. · In addition to the lender bondholder investment, Victory Holdings and Leonard Green & Partners would provide the funds for an injection totaling $9 million into Almacs. This would fund a creditors' repayment program and the chain's operations going forward.
· A new collective bargaining agreement, which calls for continuation of the current 9% wage cut until March 1996.
· An agreement by unsecured creditors, primarily trade vendors, to accept a $3 million note and the proceeds of a litigation trust fund relating to a possible prior claim.
Once the required number of creditors have accepted it, Almacs would seek confirmation of the plan by the court, which is the final step before emerging from Chapter 11.
