Brookstone backs Spencer’s bid in bankruptcy sale

N.H. firm ‘committed’ to offer, not web retailer’s

Brookstone Inc. is committed to a bankruptcy sale to fellow retailer Spencer Spirit Holdings, despite an unconfirmed Wall Street Journal report of a rival bid from Web search firm Blucora Inc. to buy the consumer electronic retailer and merge it with an online seller of electronic accessories.

“Brookstone is not currently in discussions with Blucora,” said Pauline Collins, the Merrimack-based company’s public relations manager. “Brookstone is committed to Spencer Spirit and is excited to join forces.”

Brookstone planned to sell the company through bankruptcy court by filing for Chapter 11 reorganization. The practice is a common one to expedite the sale of companies like Brookstone that are laden with debt.

Brookstone fits the bill. The company lost $46.1 million in the last three quarters of 2013, with some $13.3 million of that in interest. The company only had $1 million in cash equivalents on hand at the end of September, down from $31.6 million at the beginning of the year.

In such prearranged sales, the company often files bankruptcy with a buyer in mind. In this case, it would be Spencer Spirit Holdings, according to Brookstone’s March 27 press release.

Brookstone said that the sale wouldn’t affect the company’s 240 stores at mall and airport locations, which specialize in adult gadgets. Nor would it affect the company’s catalog, website and wholesale channels, all of which would operate under the Brookstone brands “with current employees remaining at their respective location.”

“Today marks a new chapter in Brookstone’s history,” said Jim Speltz, president and CEO of Brookstone, about the filing. “While we have implemented various successful cost-cutting initiatives, the search for a strong strategic partner who shares our vision and passion was a natural progression. We think we have found that in Spencer Spirit and are excited about the opportunity to begin leveraging the resources of the two companies and popularity of the Spencer, Spirit and Brookstone brands.”

Spencer, a privately owned company based in New Jersey, has some 644 stores that specialize in popular themes for young adults. It also includes Spirit, which operates more than 1,000 seasonal Halloween stores that usually pop up in vacant mall space.

However, once the case enters bankruptcy court, Brookstone will not have the final word on the matter. Under such sales, Spencer would officially be a stalking horse to set up a baseline offer for the assets to make sure that creditors get paid.

A stalking horse is designed to attract other bidders, who at a premium could outbid the original dealer. The more bidders, the better. It’s up to the bankruptcy judge to decide who should get the company, based on the best interests of the creditors.

Spencer reportedly offered $120 million in cash in the deal for Brookstone, according to an earlier WSJ report. On Monday, the paper said, Blucora, which owns WebCrawler and TaxACT, plans also to make a bid and merge it with Monoprice, an online seller of electronic accessories that it bought last year.

NHBR could not reach officials at Blucora – based in Washington state – but a company spokesperson told Reuters, “We don’t comment on rumors or speculations.”

An earlier Wall Street Journal report cited sources that said a bankruptcy filing should come as early as Sunday. But Brookstone had not filed by the end of the day on Monday.