BARNEYS, DICKSON INK DEFINITIVE AGREEMENT
Byline: Vicki M. Young
NEW YORK — Barneys Inc. and Dickson Concepts Ltd. have made it official and now await the blessing of the bankruptcy court.
Barneys said Sunday that a definitive agreement has been signed by the two parties, calling for Hong Kong-based Dickson to purchase the assets of bankrupt Barneys for $247 million in cash and debt, plus an equity distribution to creditors. The terms are in line with those of a preliminary pact reached Aug. 2.
Under the equity provision, the creditors will get a 49 percent stake in the reorganized Barneys; Dickson would hold a 51 percent controlling interest.
Barneys said it will file the agreement today for Manhattan bankruptcy court approval. It will also request court approval to pay Dickson a $1.5 million commitment fee and a breakup fee of up to $7 million in the event that another party in a court auction makes a bid that overtakes Dickson’s.
Eleventh-hour players for Barneys could make a competing bid for the company during the 90-day period after the court rules on breakup fees. For another suitor to win out over Dickson, their first offer would have to top Dickson’s bid by $6.5 million.
A hearing on the breakup fee request could come as early as this week, sources said. Once Manhattan Bankruptcy Judge James L. Garrity Jr. signs the order for the break-up fee, the parties will have 90 days to negotiate payout allocations to the creditors, according to a source close to the deal.
A bankruptcy court hearing is set for Oct. 9 to consider Barneys’ request for an extension of its exclusivity period until Dec. 2. The period in which Barneys has the exclusive right to file a plan of reorganization is set to expire Oct. 10.
A hot topic for negotiation during the 90-day period will be the future roles of Bob and Gene Pressman, Barneys’ co-chairmen. According to the source, the two have not yet agreed on how the Pressmans will function in the reorganized Barneys. A source said that Dickson’s bid in February included “unspecified senior management roles.” The Pressman brothers are the third generation of management for the Pressman family-owned retailer, which has grown from a men’s wear discounter to a purveyor of world-class designer name apparel.
The accord with Dickson, announced in a statement by Barneys and its unsecured creditors’ committee, represents a big leap forward in the retailer’s effort to emerge from its 19-month-old bankruptcy case. “We look forward to moving on to the next step in the restructuring of Barneys,” the company said in announcing the definitive deal.
The deal was not easy to come by. The deadline was extended six times from the original Aug. 15 cutoff.
Dickson’s accountants reportedly needed more time to review Barneys’ books, slowing the deal’s conclusion, according to sources overseas. Barneys did not comment on the delays. According to one source, the paperwork for the deal has ballooned from an eight-page term sheet to a document of more than 200 pages over the past six months.
Moreover, the definitive purchase concludes 18 months of talks between Dickson and Barneys. The negotiations began shortly after Barneys filed for Chapter 11 bankruptcy protection from creditors in January 1996.
Barneys sought relief under Chapter 11 because of a cash crunch and a dispute with Isetan Co. Ltd., the landlord of its three flagships in Beverly Hills and Chicago and on Madison Avenue here. Barneys operates nine stores and 10 outlets.
In February, Dickson made a $240 million cash offer, which was promptly rejected by Barneys’ unsecured creditors’ committee as “too low.” Sources said the committee had been hoping for an offer closer to $350 million.
One possible stumbling block to Dickson’s purchase of Barneys is over rent that will have to be paid to Isetan. The Dickson plan provides for an annual rent beginning at $9 million, with the possibility of boosting it to $12 million if certain sales targets are met for fiscal 1997. Since it filed Chapter 11, Barneys has maintained that the $23 million rent to Isetan for the three flagships is too high and has claimed that the more appropriate market rent should be closer to $10 million.
Isetan is said to be unhappy with the proposed rent. It had agreed to a $15 million annual rent under an acquisition deal proposed by Saks Holdings Inc., parent of Saks Fifth Avenue. However, a source said that Isetan should realize that “there is no appreciable difference between $12 million and $15 million” and that “Isetan will have to deal with what it can get now that the Saks offer is no longer available.”
Saks was just one of several suitors whose plans to bail Barneys out of bankruptcy didn’t work out.
Saks initially bid $330 million for Barneys in February. That offer went nowhere after Saks rejected a suggestion that the Pressman family have a seat at the bargaining table.
Saks followed with a $290 million offer of cash and stock in April and had planned on submitting with Isetan a joint plan of reorganization for the bankrupt retailer. However, the unsecured creditors’ committee said it was unhappy with that deal, which included a $50 million payout to Isetan. Saks withdrew the offer in July, stating that the $290 million bid was too high.
Other parties that flirted with Barneys included Heico Acquisitions Inc. and Texas Pacific Group, both investment firms that submitted undisclosed bids in July for the upscale business.
Also said to have been interested was Singapore billionaire Ong Beng Seng, whose wife Christina Ong is the owner of London-based Club 21 and a partner in various international stores for high profile designers and brands.
Ong has been sitting on the sidelines.
In the end, Dickson struck an agreement with Barneys after reformulating its offer in July to include the cash, stock and debt.
Isetan declined comment on the deal with Dickson, stating that it wanted first to review the terms of the agreement.