The K&G Acquisition Corp., a division of The Men’s Wearhouse Inc., outbid two other parties for bankrupt Filene’s Basement late Friday night after a lengthy auction, agreeing to pay more than $60 million for a total of 17 to 20 sites and store inventory.
This story first appeared in the June 8, 2009 issue of WWD. Subscribe Today.
The deal is for $62 million in cash and the first $5 million of the money Men’s Wearhouse would receive from Vornado Realty Trust. According to sources, since January, Vornado has been paying $500,000 a month to the retailer for not delivering the store that is planned for the prominent and problematic Downtown Crossing development in downtown Boston. (Vornado also made a play for Filene’s Basement, in a joint effort with Syms Corp.)
Work on the $700 million Downtown Crossing development stopped in 2007 due to construction issues over the property’s redevelopment into a mixed-used site. Under the terms of the deal, Filene’s Basement was to have received a 20-year lease at the bargain basement price of just over $2 a square foot. The new store was originally scheduled to open this year.
K&G Aquisition’s bid includes the Basement’s Boston flagship.
K&G operates the chain K&G Fashion Superstores, which sells discount designer apparel for men, women and children. According to sources, Men’s Wearhouse will convert the majority of the existing K&G stores into Filene’s Basements.
Men’s Wearhouse’s plan is one of reorganization that will retain the majority of Filene’s Basement’s 1,800 employees, including the bulk of the buyers, according to sources. Considered a favorable workplace for employees, Men’s Wearhouse has been voted one of the top 100 companies to work for by Fortune Magazine for seven of the past eight years.
The bid requires Delaware bankruptcy court approval. A hearing is set for Wednesday. David Edwab, vice chairman of Men’s Wearhouse and the company’s long-time dealmaker, is reportedly spearheading the bidding process. Edwab, who has also worked for Bear Stearns and sits on the board of New York & Company Inc. and the Vitamin Shoppe, could not be reached for comment over the weekend.
FB II Acquisition Corp., a holding company of the Buxbaum Group, acquired Filene’s Basement from Retail Ventures Inc. on April 20. Two weeks later, the off-pricer filed for Chapter 11 bankruptcy court protection, posting $182 million in liabilities and $84 million in assets for the year ended Jan. 31. Retail Ventures had closed 11 stores prior to the April transfer to FB II.
Also bidding for the Basement were Crown Acquisitions and the joint venture between Syms and Vornado. Crown Acquisitions was named stalking horse bidder for Filene’s before the auction. Crown’s bid was $22 million for 17 of Filene’s 25 sites.
Stevan Buxbaum of the Buxbaum Group over the weekend cautioned that the auction result isn’t official until bankruptcy court approval is granted. There were rumblings by estate sources in the past two days that the auction might be contested, possibly by Crown. The contention reportedly is that K&G was given excess time to submit a bid.
Filene’s Basement was founded in 1909, and previously filed for Chapter 11 in 1999. It was acquired by Value City in 2000. Value City, which was acquired by Retail Ventures in 2003, went bankrupt and was liquidated in 2008.