Auction spells end for Bon-Ton

Liquidator has top bid for company

Unable to find a white knight to ride in and save it, bankrupt Bon-Ton Stores Inc. is about to join a growing list of retail chains to go out of business.

The top bid in a two-day auction for the parent company of Boston Store, Younkers and other department store brands went to liquidators Great American Group and Tiger Capital Group and a group of BonTon’s debt holders, the company said Tuesday night.

The winning bid was $775.5 million, according to New York research firm Reorg Research.

“While we are disappointed by this outcome and tried very hard to identify bidders interested in operating the business as a going concern, we are committed to working constructively with the winning bidder to ensure an orderly winddown of operations that minimizes the impact of this development on our associates, customers, vendors and the communities we serve,” Bill Tracy, chief exec-

utive of Bon-Ton, said in a statement. “We are incredibly grateful to all of our associates for their dedicated service to Bon-Ton and to our millions of loyal customers who we have had the pleasure to serve as their hometown store for more than 160 years.”

The company said Bon-Ton’s stores, e-commerce and mobile platforms will remain open throughout the store closing sales. The company said it expects to provide more details about the liquidation plans and going-out-of-business sales at its stores following approval of the winning bid by the court.

The liquidation of the company’s more than 200 stores is expected to take 10 to 12 weeks.

The only two bids at the start of a bankruptcy auction for the department store chain were from liquidators, even though Bon-Ton executives had hoped to find a buyer that would help turn around the fortunes of the retailer.

Attorney David Wander, whose New York firm, Davidoff Hutcher & Citron, represents two Bon-Ton vendors, said in an interview earlier Tuesday there was very little possibility Bon-Ton could avoid liquidation, and that an 11th-hour bid in court to save the company was highly unlikely.

“It wouldn’t be really appropriate to entertain a bid that comes in out of left field,” Wander said. “That being said, if there was a bid like that and it was so unbelievably phenomenal for everyone, the bankruptcy court has the ability to bend its own rules, so to speak. But I don’t see anything like that on the horizon. So it looks like Bon-Ton is heading to liquidation. It’s very sad.”

A judge confirms the prevailing bid, the clock would begin ticking for more than 700 jobs at Bon-Ton’s downtown Milwaukee co-headquarters and more than 2,200 altogether around the state.

The proceeds of the sale and liquidation of assets would go toward paying creditors.

Bon-Ton hasn’t been profitable since 2010. Mall-based department stores have been among the hardest hit as traffic to malls has dropped off and more consumers order products from online retailers. Bon-Ton stores have been an anchor in about two dozen Wisconsin shopping centers and malls for decades.

When Bon-Ton filed for Chapter 11 bankruptcy protection Feb. 4, management said it was striving to find a new investor or buyer for the company.

A Bon-Ton consultant contacted 28 potential investors this winter in an effort to restructure the company or sell it. It also contacted two groups of liquidators. The liquidators bid as early as January, but investors interested in keeping the company alive proved harder to find.

Last week, Bon-Ton received a letter of intent — but not a formal bid — for the company from an investor group that included two mall owners and a New York investment firm: Namdar Realty Group, of Great Neck, N.Y., Washington Prime Group, of Columbus, Ohio, and hedge fund DW Partners.

But that potential offer suffered a setback when the U.S. Bankruptcy Court judge handling the case said Bon-Ton couldn’t pay $500,000 in due diligence and other fees for the mall owners and investment firm. Lawyers for Bon-Ton had portrayed that $500,000 reimbursement as a requirement for the mall owners and DW Partners to move forward with a formal bid.

A group called the Official Committee of Unsecured Creditors, which represents employees and hundreds of landlords and vendors in the Chapter 11 case, has supported the efforts of management to sell the company to investors who would keep it going. In a court filing, the committee said the investor group that includes mall owners was “the last and only hope to save Bon-Ton from the fate of so many retailers that have filed for bankruptcy during this ‘retail apocalypse.’ ”

“It wasn’t for lack of trying that something didn’t happen,” Wander said. “The committee attorneys did as good a job as anyone could expect.”

Bon-Ton is among six major retailers to file for bankruptcy so far in 2018, and one of more than 40 in the last five years, information from Bankruptcydata.com shows. Other familiar retail names that have filed for Chapter 11 bankruptcy include: Claire’s Stores Inc., Nine West Holdings Inc., Walking Company Holdings Inc., Toys R Us Inc., Gymboree Corp., rue21 Inc., Payless Inc., hhgregg Inc. and The Sports Authority Inc.

According to Reorg Research, the Bon-Ton bankruptcy auction started with only two qualified bids — one from liquidators Hilco Merchant Services and Gordon Brothers Retail Partners, and the other from the eventual winners.

“They hung on for a long time, but it seems for the last several years they fell victim to some of the trends that are costing department stores market share generally,” said consultant Dick Seesel, owner of Mequon-based Retailing in Focus.

Burt P. Flickinger III, managing director of Strategic Resource Group, a consumer business consulting firm headquartered in New York City, said he believes the system is flawed for many retail bankruptcies.

“The bankruptcy lawyers and judges just take what’s broken and break it and crush it so it’s un-fixable,” Flickinger said.

Flickinger added: “With the right plan, somebody would buy Bon-Ton. But the way the lawyers and the bankruptcy judge and the bankruptcy lawyers’ advisers are going, it’s like Toys R Us. Wrong people, wrong plan.”

Retail consultant Anne Brouwer said Bon-Ton department stores have been squeezed by brick-and-mortar competition across the price spectrum as well as by online merchants.

“There’s huge pressure from both the top and the bottom, particularly the bottom,” said Brouwer, senior partner with McMillanDoolittle in Chicago.

Although the Boston Store name has been part of Milwaukee for more than 100 years, Bon-Ton entered Wisconsin for the first time in 2003 when it purchased the Elder-Beerman department store chain, which had five stores in the state, for almost $93 million.

Bon-Ton’s big expansion in Wisconsin came in 2006, when it bought the Saks Inc. Northern Group, which was headquartered in Milwaukee, for about $1.05 billion. The Saks Inc. Northern Group included the Boston Store, Carson Pirie Scott, Bergner’s, Herberger’s and Younkers department stores.