PHAR-MOR TAKEOVER 9 bidders prepare to compete
Snyder's wants Phar-Mor badly enough that it has improved its offer and is willing to make more changes.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- At least nine bids for Phar-Mor are in, but officials hope the bidding is far from over.
Phar-Mor executives and creditors want to set the stage for spirited bidding at an auction Tuesday by picking their favorite bid ahead of time.
Phar-Mor hopes this bid not only has the highest price but preserves the most jobs, said John Ficarro, senior vice president. More than 1,000 jobs at Phar-Mor stores, its headquarters and Tamco distribution center depend on whether a successful bidder chooses to continue those facilities.
One of the bidders, Snyder's Drug Stores of Minnesota, is prepared to sweeten its offer, if necessary, said Gordon Barker, company president.
Not only is the price negotiable, but so are the terms.
Barker said Snyder's intends to keep six of Phar-Mor's eight area stores but would be willing to increase that to seven, depending on what the other bidders want. He declined to identify specific stores.
Snyder's has been the most public with its bid as it tries to convince area politicians, business officials and union leaders that its offer is in the best interest of the community. Barker said the company's bid was improved over a previously announced proposal, which included $70 million for 30 Phar-Mor stores and Tamco plus about $75 million to come from the liquidation of other stores.
Brett Miller, lawyer for Phar-Mor's unsecured creditors, said Friday that he had nine bids, although he said there may be more.
The deadline to submit bids to Phar-Mor was Thursday. Ficarro would not say how many bids were received.
The only other company to talk publicly about its bid is Phar-Mor Acquisition, a joint venture between two liquidation companies.
Giant Eagle bids
Miller said Giant Eagle, the Pittsburgh-based grocery giant, has joined that bid and changed its terms. He didn't release any details.
Rob Borella, director of corporate communications for Giant Eagle, said he couldn't talk about the bid because of the changing nature of the auction process. He would only say that Giant Eagle is always interested in assets that would improve the company financially and its ability to serve customers, and its Phar-Mor proposal would help it do both.
An offer announced earlier in bankruptcy court proceedings called for Phar-Mor Acquisition to try to sell groups of stores to retailers and liquidate those stores that don't sell.
Miller said the bids range from buying one store to the entire company. None of the bidders are proposing operating all of Phar-Mor's 73 stores, however.
The bids vary so much that the first job is finding a way to compare the value of the bids, he said.
Ficarro said company executives and creditors intend to place the best bid before the other bidders and see which ones want to up their offers.
"People might be holding back. They may have just bid to get a seat at the auction," he said.
At the end of the auction, the company and creditors intend to recommend a bid to Judge William Bodoh of U.S. Bankruptcy Court in Youngstown. If they can't agree, the judge will have to choose from the bids without a recommendation. A hearing is scheduled for Thursday.
Barker said Snyder's is pushing hard to be the top bidder because it likes some of Phar-Mor's stores, the computer system at its headquarters and the Austintown distribution center.
He said Snyder's wants at least 30 stores, but the exact number will depend on the other bids. The final number would not be much above 30, he said.
Barker said the Phar-Mor stores would complement the 78 stores that Snyder's acquired last year from Columbus-based Drug Emporium. Those stores, which are located in Ohio, Michigan, New York and Pennsylvania, are in the same geographic region as Phar-Mor's core stores and have similar product mixes.
One attraction to Phar-Mor has been its success at selling groceries, Barker said. He wants to extend that expertise to Drug Emporium stores and to Snyder's, in a smaller way. Snyder's stores wouldn't carry many grocery items because they are smaller, neighborhood drugstores, he said.
While Snyder's wouldn't need all of Phar-Mor's headquarters, it would be highly likely that it would keep Phar-Mor's computer information system and operate that in Youngstown, he said.
Snyder's is operating separate systems for its stores and Drug Emporium stores and has been holding off on integrating them until the Phar-Mor bidding is resolved, he said. From its review so far, Snyder's officials think Phar-Mor's system could be used for the entire company, he said.
Because of the cost of moving the system, Snyder's might leave it downtown if leases for the office space can be worked out, he said.
Snyder's, which doesn't have a central warehouse, likes Tamco because it has a good work force and is perfectly located for Snyder's, he said. The company has said it will add hourly jobs at Tamco, which now employs 250, because the warehouse would be supplying about 300 stores instead of 73.
Also, Barker said, it seems to make sense to locate the company's accounts payable department at Tamco because that work is closely tied to the receiving of inventory.