Big Lots files for bankruptcy, selling itself to private equity firm
Big Lots has agreed to sell “substantially all” of its stores and business operations to Nexus Capital Management.
The closeout retailer filed for Chapter 11 bankruptcy protection on Monday as part of a deal to be acquired for about $760 million by the private equity firm, which will serve as the “stalking horse bidder.” The proposed deal, which is subject to higher offers and other conditions, consists of $2.5 million in cash plus remaining debt. It is expected to close in the fourth quarter.
Big Lots, which has struggled in recent years with declining sales, listed assets and liabilities of $1 billion to $10 billion in its bankruptcy petition. In June, the retailer warned of its ability to survive as a "going concern."
“The actions we are taking today will enable us to move forward with new owners who believe in our business and provide financial stability, while we optimize our operational footprint, accelerate improvement in our performance, and deliver on our promise to be the leader in extreme value,” stated president and CEO Bruce Thorn.
In an August filing with the Securities & Exchange Commission, Big Lots said it planned to close about 300 of its 1,500 stores, but more store closures are likely. In a news release on Monday, the retailer said it will continue to assess its operational footprint, which will include closing additional store locations. It will also continue to review its distribution center model.
"Though the majority of our store locations are profitable, we intend to move forward with a more focused footprint to ensure that we operate efficiently and are best positioned to serve our customers,” said Thorn. "To accomplish this, we intend to use the tools afforded by this process to continue optimizing our store fleet in an orderly manner."
In the release, Big Lots said its business has been negatively affected by recent macroeconomic factors such as high inflation and interest rates. It noted that prevailing economic trends have been "particularly challenging" as its core customers curbed discretionary spending on home and seasonal product categories, which represent a significant portion of the company's revenue.
Big Lots said it has secured commitments for $707.5 million in financing which will provide sufficient liquidity to to support the company while it works to complete the sale transaction.
Davis Polk & Wardwell LLP is serving as legal counsel, Guggenheim Securities, LLC is serving as financial advisor, AlixPartners LLP is serving as restructuring advisor, and A&G Real Estate Partners is serving as real estate advisor to the company. Kirkland & Ellis is serving as legal counsel to Nexus.
