Update on Walgreens-Rite Aid merger
There's been another development in the planned Walgreens Boot Alliance and Rite Aid merger.
Even as media reports circulated Friday that the Federal Trade Commission was preparing to block the merger between Walgreens Boots Alliance and Rite Aid, one of the merger’s key players took steps to help strengthen the case to approve it. According to a Securities and Exchange Commission filing, Fred's Pharmacy secured additional financing Friday to meet its obligation of acquiring as many as 1,200 Rite Aid stores that are expected to be divested as part of the merger.
The company entered into a second amended and restated commitment letter with its lenders that increases the committed financing by $450 million, from $1.2 billion to $1.65 billion; extends the initial outside commitment date to July 31, 2017; and permits Fred's to further extend the outside commitment date to Oct. 31, 2017.
Another amended and restated commitment letter increases financing by $100 million, from $450 million to $550 million with similar extensions.
"Financing made available under the Second Amended and Restated ABL Commitment Letter and the Amended and Restated Term Loan Commitment Letter will be used to fund the company’s proposed acquisition from Rite Aid of assets, including up to 1,200 retail stores, certain intellectual property, corporate infrastructure and distribution centers," Fred's CFO and executive VP Rick Hans said.
Mills Fleet Farm names new CEO
Mills Fleet Farm has ended its hunt for a CEO.
The Midwest retailer announced the appointment of Derick Prelle as president and CEO succeeding Wayne Sales, who has been serving as interim chief since January 2017. Sales was given the position following the departure of Duncan MacNaugton, who left to become president and COO of Family Dollar.
Prelle joins Mills Fleet Farm from KKR Capstone, which acquired the formerly family-owned Mills Fleet in January 2016. As managing partner – Americas, Prelle ran KKR’s retail and consumer operations group over the past decade. He has worked closely with Mills Fleet in his role working with KKR’s portfolio companies.
Prelle also has significant experience working in the retail sector from his role as an associate partner in McKinsey & Company’s retail and consumer practice. In these two capacities, he has led significant transformation efforts at companies, including Dollar General and National Vision.
“Every day since I first started working with Mills Fleet Farm over a year ago, I’ve found myself continuing to be more and more excited to be a part of the Mills Fleet Farm story – one of an authentic brand, an incredibly differentiated concept, an exceptional leadership team and customer loyalty that spans generations,” said Prelle.
Effective today, Sales will return to Mills Fleet Farm’s board and serve as a special advisor to the company’s management team.
Founded in 1955, Mills Fleet is a value-based retailer of lifestyle merchandise serving suburban and farm consumers. The retailer also offers a number of services such as convenience stores, gas stations, car wash and auto service. The company operates 36 stores located throughout Wisconsin, Minnesota, Iowa and North Dakota.
Children’s clothing retailer files for bankruptcy; store closings loom
Gymboree has filed for Chapter 11 bankruptcy protection.
The retailer announced the filing, which was widely expected, on Sunday. Gymboree, which has partnered with AlixPartners to assist with turnaround efforts, plans to close 375 to 450 of its 1,281 stores, according to the filing.
The Chapter 11 filing should reduce Gymboree's debts by more than $900 million. The company has been under increasing pressure with a heavy debt load, the majority of which stems from Bain Capital’s $1.8 billion leveraged buyout of the retailer in 2010. Gymboree said expects to operate its overall business and the majority of its stores as usual during its financial restructuring.
"The steps we are taking today allow the company to definitively address its debt and enable the management team to turn its full focus toward executing our key strategies, including our Product, Brand and Omni-channel initiatives," said Daniel Griesemer, president and CEO of Gymboree, which operates 1,281 stores. "We have three great brands, strong operations and dedicated employees, and throughout this process, we will continue to deliver superior service to our customers and put them at the center of all we do."
The retailer has secured commitments for $35 million in new-money debtor-in-possession financing from a majority of its existing term loan lenders. It also has secured up to $273.5 million in additional DIP financing from the existing lenders under asset backed loan credit facilities which, in addition to Gymboree's ongoing cash flow, will ensure the company is able to continue meeting its financial obligations throughout the Chapter 11 case.
"The support of our lenders and their new financing commitment underscores their confidence in the company," Griesemer said. "We expect to move through this process quickly and emerge as a stronger organization that is better positioned in today's evolving retail landscape, with the right size store footprint and greater financial flexibility to invest in Gymboree's long-term growth."
Additionally, Gymboree announced that Andrew North is stepping down as CFO for personal reasons. He will remain for a period of time as a consultant. Liyuan Woo, director at AlixPartners, has been appointed as CFO, while the company searches for a replacement.
As of April 29, 2017, Gymboree operated a total of 1,281 retail stores: 582 Gymboree stores (532 in the United States, 49 in Canada and one in Puerto Rico), 172 Gymboree outlet stores (171 in the United States and one in Puerto Rico), 149 Janie and Jack shops (148 in the United States and 1 in Puerto Rico) and 378 Crazy 8 stores in the United States.