Brookstone Inc., which sells consumer gadgets ranging from
travel electronics to massage chairs, is preparing to file for
bankruptcy protection as early as Sunday, with a plan in place to
be bought by another specialty retailer, people familiar with the
matter said.
Egg Harbor Township, N.J.-based Spencer Spirit Holdings Inc.,
which owns Spencer's and costume retailer Spirit, has been in
discussions with Brookstone for weeks, the people said, as
Brookstone battles disappointing sales, weak liquidity and a hefty
debt load. The two parties are hoping to finalize sale paperwork
over the weekend leading up to a bankruptcy filing, they said.
Spencer Spirit Holdings is expected to pay around $120 million
for Brookstone, the people said. Brookstone has about $140 million
in debt.
Spencer Spirit Holdings, which is privately owned, doesn't
currently plan to reduce the number of Brookstone stores or
employees, the people said.
After missing an interest payment to creditors in January,
Brookstone, of Merrimack, N.H., in recent weeks evaluated a few
bidders for the company, including its bondholders led by KKR &
Co. and Canyon Partners LLC, people familiar with the matter
said.
Spencer's sells clothes and accessories geared toward 18-24 year
olds, such as Bob Marley tank tops, belly button rings and pink
leopard print messenger bags.
Brookstone, which got its start as a catalog retailer in the
1965 selling "hard-to-find tools," was taken private in 2005 by
investment firms J.W. Childs Associates LP, Osim International Ltd.
and Temasek Holdings Pte. The $440 million deal saddled the company
with additional debt, and Brookstone failed to meet sales
expectations amid a recession that cut into consumers' disposable
income, people familiar with the matter have said.
Increased competition from Internet retailers also hurt the
company's sales. By Sept. 28, 2013, Brookstone had $1.1 million in
cash, down from $31.6 million a year earlier, according to its most
recent earnings filing.
Spencer's, which also began as a mail-order catalog, opened its
first store in 1963. It describes itself as "the leader in fun and
novel products' from the Whoopee Cushion to lava lamps. It has more
than 600 stores in the U.S. and Canada in addition to online
retail, according to its website, which includes its core mission:
"Life's a Party--We're Makin" it Fun!"
The broader retail sector has been struggling lately, with many
companies posting underwhelming holiday sales and some facing acute
distress.
Discount retailer Loehmann's Holdings Inc. filed for Chapter 11
protection in December and is shutting down its stores. Women's
clothing retailer Dots LLC followed Loehmann's into bankruptcy
court in January, and about two months later plus-size women's
retailer Ashley Stewart Holdings Inc. filed for bankruptcy
protection.
Write to Emily Glazer at emily.glazer@wsj.com
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