PHAR-MOR AUCTION Closings loom for 52 stores
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YOUNGSTOWN -- The bidding group that won the auction for Phar-Mor intends to close 52 stores and operate 21 others while it tries to sell them.
Going-out-of-business sales will begin Friday at the stores to be closed if a bankruptcy court judge approves the group's bid, said Sid Lambersky, vice president of business development for Hilco Merchant Resources of Chicago.
In a private auction Tuesday, Phar-Mor selected an offer of about $141 million from the Hilco group as the best bid for its assets. U.S. Bankruptcy Court Judge William Bodoh will be asked to approve the selection Thursday.
Lambersky said he didn't know the locations of the 21 stores that would be kept open if the judge approves the Hilco offer. He said a time frame for the sale would be up to the judge.
Lambersky said he didn't know the plans for Phar-Mor's Tamco distribution center, which employs nearly 300.
Giant Eagle would receive ownership of Tamco, said Brett Miller, lawyer for Phar-Mor's unsecured creditors.
Role for Giant Eagle, CVS
Giant Eagle, a Pittsburgh-based grocery chain, and CVS, a Rhode Island-based drugstore chain, are part of the Hilco group, along with a Boston liquidation company.
Lambersky said Giant Eagle and CVS intend to take over the prescriptions at the 52 stores that would be closed. Prescriptions would be maintained at the Phar-Mor stores until they are switched over, he said.
Giant Eagle officials also are meeting with Phar-Mor management about how they can hire Phar-Mor employees who would lose their jobs at the stores to be liquidated, he said. Giant Eagle thinks it can take hundreds of Phar-Mor employees, he said.
Youngstown Mayor George Mc-Kelvey said he was disappointed to learn that Snyder's Drug Stores of Minnesota had pulled out of the bidding Tuesday after about 14 hours. Losing Snyder's could mean lost jobs, he said.
Phar-Mor has more than 1,000 employees at local stores, Tamco and Phar-Mor's corporate headquarters in Youngstown.
Snyder's said it wanted to operate 30 Phar-Mor stores, including at least six in this area. It also said it would add jobs Tamco and use some of Phar-Mor's corporate employees.
"If Snyder's has, indeed, pulled out, I'm greatly saddened," McKelvey said. "It's terrible news for the Valley. It means the loss of hundreds of jobs, and the loss of tens of millions of dollars to the Valley economy."
McKelvey said he wrote a letter to Judge Bodoh on Monday, urging him to accept the Snyder's bid if it is equal to others submitted because it would have the greatest potential for a positive economic impact.
However, if the bids are not equal, the mayor said Bodoh's prime obligation must be protecting the interests of Phar-Mor's creditors.
"If Judge Bodoh, in his wisdom, has the discretionary authority to make the determination that Snyder's is a better bid, I would strongly support his decision to choose the Snyder's bid for economic reasons," he said.
Greg Sherlock, vice president of media and communications for the Youngstown/Warren Regional Chamber, said officials there were still studying the outcome of Tuesday's auction this morning.
"We would hope that the successful bidding team, which we understand includes Giant Eagle and CVS, would look at the situation and take a similar posture as Snyder's had originally planned to take regarding jobs and economic development," Sherlock said.
"Obviously, we will want to work with anybody."
Bob Bernat, secretary-treasurer of Teamsters Local 377, said he will try to talk to Giant Eagle officials to determine what the bidders' plans are for Tamco, which has about 250 union workers.
Bernat said he asked Daniel Shapira, a Giant Eagle lawyer, about the warehouse last week and was told that Giant Eagle wasn't sure what its plans were.
"They may sell it. They may sell it to Snyder's. Who knows?" Bernat said.
After the bidding ended just before midnight, Shapira declined to talk about the group's plans for the stores or warehouse.
"Giant Eagle will try to recruit as many Phar-Mor employees as possible, especially in areas where there are Phar-Mor and Giant Eagle stores," he said.
Cory Lipoff, a principal at Hilco, said only that the winning bid was "north of $141 million."
The unsecured creditors committee, which had previously backed Snyder's bid, agreed Tuesday that Hilco's final offer was superior to Snyder's, Miller said.
There were at least nine bidders Tuesday, but the only other group that made its bid public was Snyder's.
Shapira said the Giant Eagle group had the only offer on the table when Snyder's withdrew its offer.
Gordon Barker, Snyder's chief executive, announced "Snyder's is out," as he and a handful of his associates left Phar-Mor's downtown Youngstown headquarters around 11:30 p.m. Tuesday.
When asked for more specific information, Barker's only comment was, "It's an auction. We're leaving it to them."
Snyder's officials could not be reached to comment further today.
Snyder's original bid was worth $145 million. About $70 million of that was for the 30 Phar-Mor stores it intended to operate and the Tamco distribution center in Austintown. The rest would come from liquidating the other stores.
Phar-Mor officials said at a court hearing last month that they didn't like this bid as much as the liquidators' bid because the payment wasn't all cash. Part of the payment was in corporate notes.
When Phar-Mor filed for bankruptcy protection in September, it said it intended to continue operating. Continuing heavy losses, however, forced it to decide to sell the company's assets.