With its $305 million “stalking horse” bid, SPARC Group LLC (SPARC) has raised the possibility that Brooks Brothers will be able to emerge from bankruptcy with at least 125 of its brick-and-mortar stores remaining in operation. The retailer currently operates approximately 250 stores in North America and an equal number outside the U.S. and Canada, but already has decided to close about 50 of its North American locations.
Stalking horse bids provide a “floor” for the value of assets, but leave the seller with leeway to accept higher or better offers. To be accepted, bids for Brooks Brothers’ assets must be at least $1 million higher than SPARC’s proposed purchase price. The bankruptcy court has set August 5 as the deadline for submitting bids.
A declaration filed in U.S. Bankruptcy Court for the District of Delaware lays out the 15-month-long effort led by the investment banking firm PJ Solomon to sell Brooks Brothers, which resulted in “a number of parties” submitting indications of interest (IOI). After COVID-19 “severely jeopardized the debtors’ ability to consummate any previously contemplated transaction,” PJ Solomon reached out in May for stalking horse bids “in connection with a potential Chapter 11 case.” Brooks Brothers subsequently filed for bankruptcy protection on July 8.
Earlier this month, SPARC, which is jointly owned by Authentic Brands Group and mall owner Simon Property Group, submitted a stalking horse bid valued at $191 million for Lucky Brand in its bankruptcy proceedings.
WHP Global Inc. confirmed to multiple media outlets that it is preparing a competing bid for Brooks Brothers. “It’s early innings in the Brooks Brothers bankruptcy sale process,” said Yehuda Shmidman, CEO of WHP in an interview with Bloomberg. “We are big believers in the power of the Brooks Brothers brand, the global footprint and the management team.”