The future of Brookstone still remains up in the air
Questions surround fate of bankrupt company after stalking horse bid approved
Those reading about the latest offer to buy the bankrupt Brookstone as a going concern – with the company’s Merrimack headquarters remaining along with as many as 50 stores – shouldn’t get their hopes up.
Bluestar Holdings Company did raise its bid to become the “stalking horse,” the company that agrees to start the bidding at the upcoming Sept. 26 bankruptcy auction. Bluestar not only agreed to buy the company’s intellectual property for $56.3 million (though $5.9 million of that would be in merchandise), it expressed willingness to buy all of Brookstone as a going concern, keeping 30 to 50 stores open. It even agreed to pay a penalty if it didn’t.
For Brookstone customers, employees and creditors this was the best news since the high-end gadget company filed for bankruptcy reorganization on Aug. 2, when it announced it would close all of its 102 mall stores, including one at the Pheasant Lane Mall in Nashua, and its outlet in Conway. And it was especially good news after last week, when the company warned that its 90 remaining employees in Merrimack may not have a job in November.
But in its offer, Bluestar said the going concern bid is only an “option,” the penalty it would pay for not doing so is minimal compared to the money involved, and the minimum number of stores it would keep open includes 34 of the more profitable airport stores, which it had already planned to keep open.
Bluestar, a New York company that specializes in troubled retail brands, engaged in a bidding war to become the stalking horse, which means it could get more than $1 million in fees should the company go to another bidder.
Bluestar initially bested Authentic Brands’ $35 million stalking horse offer by $8 million for the intellectual property. That’s the trademark and the branding, which is mainly used in licensing deals with 550 stores in China owned by Brookstone’s Chinese parent company and main supplier, Sanpower Group Co. Ltd.
Both initial stalking horse bids would have left the rest of the company – which includes its headquarters, its online sales and its airport stores – in limbo. The Official Committee of the Unsecured Creditors urged Brookstone to accept Authentic Brands’ enhanced but late offer for $50 million, for Brookstone as either a going concern or for its intellectual property.
But on Sept. 7, Brookstone signed the Bluestar agreement, approved by the bankruptcy court in Delaware.
“This agreement with Bluestar is an indication of the value of Brookstone’s cherished brand, and we are particularly encouraged by Bluestar’s enthusiasm to seriously consider a bid that includes operating Brookstone retail outlets,” said Brookstone CEO Piau Phang Foo.
Bluestar would pay $50.45 million in cash, plus toss in $5.9 million in the form of “readily salable inventory” that Brookstone could sell at its closing mall stores or the airport stores. But whether Bluestar keeps Brookstone alive as a going concern is at Bluestar’s “sole discretion,” Bluestar said in its letter of intent.
The letter did not specify whether the stores remaining open were mall or airport stores, meaning they are probably the airport stores. But if Bluestar does keep 50 stores open, it presumably means 16 mall stores, or perhaps the outlet stores, would escape the ax.
The agreement, however, only requires Bluestar to pay a $400,000 fee if it doesn’t follow the going concern route.
Meanwhile, on Tuesday the court issued an order approving the continued closing sales at Brookstone’s mall stores, which are scheduled to be completed on Sept. 30, the same day the bankruptcy sale is supposed to close, pending court approval the very next day.
Bluestar may not be the only offer on the table after the Sept. 26 auction (moved up two days because of a Jewish holiday.) But this timeline gives creditors and other interested parties even less time to object to any sale