Suitors line up with bids for stores in Canada

TORONTO Debtors for the insolvent U.S. parent company of Toys ‘R’ Us Canada have received “multiple” non-binding offers for the company ’s Canadian stores, even as the toy chain’s U.S. stores ready for liquidation.

Court documents filed in the U.S. reveal the Canadian operation could be in the hands of a new owner within weeks using an expedited court process aimed at keeping the 82-store chain alive in this country.

The debtors are actively negotiating with potential bidders for a reverse merger of New Jersey-based Toys ‘R’ Us, Inc.’s equity interests in Toys ‘R’ Us Canada, according to documents filed at the U.S. Bankruptcy Court in Richmond, Va. Interested parties have been given access to an electronic data room with detailed financial records for the business. The deal would ideally salvage up to 200 of the topperforming U.S. stores, the documents said.

The proposed timeline for the sale is quick: If there are several qualified competing bids, the debtors will hold an auction for the business on March 29 and the closing of the sale of the Canadian equity would occur “no later than April 16.”

Last week Toys ‘R’ Us said it will liquidate and close its 740 U.S. stores, an announcement that immediately threw the future of the Canadian operation into doubt. The New Jersey-based retailer also announced the closure of its 106 stores in the United Kingdom after failing to find a buyer.

Because the proposed transaction for the Canadian operation would be a transfer of equity as opposed to a sale of Canadian assets, any such deal would take place in the U.S. because equity is associated with the provenance of the owner. If any U.S. stores are involved in the sale process they will be removed from the current liquidation process, the filing said.

“This process might not involve the Canadian courts at all,” said Lou Brzezinski, partner at Toronto-based Blaney McMurtry LLP, who represents several Canadian creditors in a concurrent Ontario Superior Court bankruptcy protection filing for Toys ‘R’ Us Canada.

The only interested buyer to declare its intentions openly for the Canadian unit is toymaker MGA Entertainment, producer of Bratz dolls and Little Tikes toys. “Toys ‘R’ Us Canada is a good business,” Isaac Larian, chief executive of MGA, said in a statement. “They run it efficiently, and have good leadership. At the right price, it makes economical sense.”

Beyond MGA, several private equity bidders are believed to be involved in the process. Mastermind, a rival Canadian toy chain owned in majority by Birch Hill Private Equity, is not interested in bidding on Toys ‘R’ Us Canada, sources say.

The Canadian big-box toy retailer, meanwhile, says its operations will not be affected by the store closings in the U.K. and the U.S., and all of its locations remain open for business.