Author Topic: VLGEA - Village Supermarket  (Read 5774 times)

DooDiligence

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Re: VLGEA - Village Supermarket
« Reply #20 on: February 16, 2020, 08:08:52 AM »
By my estimate, Friday March the 13th to the 18th will be when the stalking horse bid / sale must be completed (yes or no?)

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No later than fifty (50) days after Commencement Date

Bankruptcy Court shall have entered Sale Order approving winning bid to Stalking Horse Bid (if no Auction held); or

No later than fifty-five (55) days after Commencement Date

Debtors shall complete Auction for substantially all assets in accordance with Bidding Procedures (other than Stalking Horse Package
if no other Qualified Bids received)


(and the sale to VLGEA would be completed or not (my words))

No Later than seventy (70) days after Commencement Date

Debtors shall have consummated sale(s) of Stalking Horse Package to winning bidder(s) at Auction(s)

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"the Stalking Horse Agreement provides for the payment of a break-up fee in an amount equal to three percent (3%) of the Cash Purchase Price (the “Termination Payment”) as an administrative expense that will be included in the “Carve-Out” (as defined in the DIP Orders) in the event that the Stalking Horse Bid is not selected or the Debtors consummate one or more Sale Transactions for the Assets in the Stalking Horse Package with one or more other bidders."

https://casedocs.omniagentsolutions.com/cmsvol2/pub_47371/791525_21.pdf

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Do these things frequently go to the Stalking Horse bidder?
I would assume the courts would want to avoid the 3% breakup fee unless a higher bid were to offset it.

There are multiple debt owners & I notice that KKR is one.

The next earnings date for VLGEA will be 3 March.

* edit: It looks to me like there's no downside for VLGEA if they don't complete this purchase & as Cigarbutt said, overpaying would be a small possibility if they DO complete the purchase. The price seems fair to me though. I'm thinking about adding a bit more with the intent to sell the newer shares in the event that the purchase goes through & it pops on the news. The shares I already own will be kept for a longer period & no harm, no foul if there's no Fairway store(s) purchase and/or quick pop. I'll own everything in a tax advantaged account.

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You guys already know this stuff but just for reference, here's where I learned about these types of bids.
I now understand the purpose of providing a reserve price / stalking horse for distressed asset auctions.

www.investopedia.com/terms/s/stalkinghorsebid.asp
« Last Edit: February 16, 2020, 12:32:06 PM by DooDiligence »
BRK.B - 24.9% // Healthcare 22.5% - EW NVO // Auto's & Oil 18.4% - CLB GPC PSX VDE

Banking 9.4% - WFC // Entertainment 4.7% - DIS // Drinkers & Smokers 6.4% - MO

Retail 9.0% - ULTA VLGEA

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18 months of $

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Cigarbutt

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Re: VLGEA - Village Supermarket
« Reply #21 on: February 16, 2020, 10:52:57 AM »
...
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-
Do these things frequently go to the Stalking Horse bidder?
I would assume the courts would want to avoid the 3% breakup fee unless a higher bid were to offset it.

There are multiple debt owners & I notice that KKR is one.
...
Bankruptcies are fascinating 'cause they provide a corridor with a timeline to accelerate valuation process outcomes.
Anything could happen and sometimes timelines can be significantly extended.
The documents describe that the Fairway assets have been aggressively marketed for some time. My guess is that Village management have been vigilant observers and careful participants. They ultimately were the winners of the two potential stalking-horse bidders. The context of the bankruptcy, the extent of the pre-petition marketing process, the nature of the underlying business (grocery business is very competitive and operating lulls due to any reasons can be devastating) and the fact that they were able to "win" that part of the game by fleshing out the core assets seem to indicate that they are likely to get what they want at the price submitted. They also have the possibility to increase their bid if one comes out of the blue. It seems that Village is very well prepared to harvest the fruits (know the market and have done deep due diligence). I don't see credit bids coming and another low-ball stalking horse bid may come for the other assets but that wouldn't change the outcome for VLGEA. Also, Fairway has already suffered from leveraged resuscitation efforts twice so another round of a leveraged rise from the ashes is less likely.
This is still discovery in the making but the Bronx distribution center may hold significant value (size and location).

DTEJD1997

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Re: VLGEA - Village Supermarket
« Reply #22 on: February 16, 2020, 12:52:39 PM »
Hey all:

I am going to postulate that there will be volatility in VLGEA around earnings report(s) and the possible acquisition of the Fairway stores & distribution center.

I would suspect that VLGEA has a pretty good handle on the sales volume of the stores they are bidding on, potential profitability, problems that need to be addressed, strengths, and other operating aspects.

If the acquisition goes through AND is digested and integrated fairly well, then it is a game changing event.  A $70mm acquisition for a company with a market cap of $225mm is pretty significant.

You might also see some people want to get out.  There is plenty of risk here.  Fairway is a x2 dog, could it be a three time loser?  You've also got execution/integration risk.  The first level is that the Fairway brand name could be too damaged/tarnished.  You've next got the problem that key people and good workers jump ship.  Here in Detroit Land, we've got a tight labor market..tightest I've seen it in a LONG time.  I would assume it is the same in NYC.  If Fairway loses workers, especially good workers, it is going to be extremely difficult to replace them.  Next, you've got possible problems with VLGEA integrated Fairway.  While they are both grocers, they address different market segments.  VLGEA is more broad market, where Fairway is upscale.  Upscale shoppers are notoriously finicky and may jump ship.

Overall, I think this is probably a good move, and will probably work...but maybe something like 60/40 odds of success?

Going to be interesting!

bizaro86

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Re: VLGEA - Village Supermarket
« Reply #23 on: February 26, 2020, 09:44:53 AM »
I love the acquisition, but I'm concerned about competition in New Jersey starting to heat up. A big part of the thesis for me was that these stores are really productive. However, if the small format discount grocers take share, that could really hurt them. Would be very curious what people think about that?

https://www.northjersey.com/story/news/bergen/bergenfield/2019/12/18/aldi-and-lidl-german-grocery-chains-competing-north-jersey/2650269001/

Gregmal

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Re: VLGEA - Village Supermarket
« Reply #24 on: February 26, 2020, 10:13:21 AM »
I am sure, in the short term, you are also going to see supermarkets gets whacked because everyone is terrified of the coronavirus

Cigarbutt

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Re: VLGEA - Village Supermarket
« Reply #25 on: February 26, 2020, 11:32:07 AM »
I love the acquisition, but I'm concerned about competition in New Jersey starting to heat up. A big part of the thesis for me was that these stores are really productive. However, if the small format discount grocers take share, that could really hurt them. Would be very curious what people think about that?

https://www.northjersey.com/story/news/bergen/bergenfield/2019/12/18/aldi-and-lidl-german-grocery-chains-competing-north-jersey/2650269001/
It looks like competition has come and gone in NJ but the European discounters are a formidable threat. Grocery stores have a relatively small geographic radius and intruders will make it necessary to adjust (cost, convenience etc) and perhaps to endure lower margins for a while. Weaker competitors will go and I guess VLGEA may suffer. The Manhattan business, if acquired, would probably be hostile territory for Aldi and Lidl?
If interested:
https://www.cnn.com/interactive/2019/05/business/aldi-walmart-low-food-prices/index.html
https://www.bain.com/contentassets/8fcd2dd898ea4815b24c58d703495a04/bain_brief_how_us_grocers_are_standing_up_to_europes_hard_discounters.pdf

In my area, the "Super C" brand (part of Metro) has been able to apply some of the cutting to the bone cost aspect without compromising the convenience aspect too much. I would say adaptation is possible. Also, in my local area, despite high population growth, supply outpaced demand for a while and it's the weaker competitors that left, for the benefit of the survivors.

The threat of discount retailers (I think you like Ross stores?) is directly proportional to expectations that people will become more cost conscious or budget constrained going forward, an assumption that makes a lot of sense. Discount retailers have done well in this 'recovery' and it would be reasonable to expect more of the same if not more.

bizaro86

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Re: VLGEA - Village Supermarket
« Reply #26 on: February 26, 2020, 12:48:11 PM »
I am sure, in the short term, you are also going to see supermarkets gets whacked because everyone is terrified of the coronavirus

Sure. But I suspect all the people who dont actually die will continue eating.

@cigarbutt Yes, ROST is one of my long term holds, and interestingly doesn't seem to be perceived as Corona virus exposed, which surprised me somewhat. I think discount groceries (Aldi/Lidl) are a similar theme. I have a starter in Village, but if the same store sales really do end up at -2% because of competition that would put them in a bad spot re operating leverage.


DooDiligence

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Re: VLGEA - Village Supermarket
« Reply #28 on: March 02, 2020, 06:48:44 AM »
Earnings out tomorrow.
BRK.B - 24.9% // Healthcare 22.5% - EW NVO // Auto's & Oil 18.4% - CLB GPC PSX VDE

Banking 9.4% - WFC // Entertainment 4.7% - DIS // Drinkers & Smokers 6.4% - MO

Retail 9.0% - ULTA VLGEA

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%'s held @ MV 2/25/20 fully invested
18 months of $

i trumpet my ignorance

https://twitter.com/tunawis

DTEJD1997

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Re: VLGEA - Village Supermarket
« Reply #29 on: March 07, 2020, 08:38:36 PM »
Hey all:

Earnings are out.  They don't appear to be very good.  Earnings were $.10 vs. $.38 in the year ago period.

There were some one time charges, but it also appears that overall costs are expanding faster than they grow sales.

As incredible as it sounds, I've started to notice some labor shortages (resulting in businesses closing/scaling back when workers don't show) in the metro Detroit area.  Not a lot, but a few, and this is the first time I've ever seen such a thing.  I would think that in NYC, and the East coast, that they have an even tighter labor market than we do.

That is going to make expansion plans that much more difficult.  Where are you going to get the workers?  If you can get workers, are they going to be second and third rate?  Existing workers could jump ship to other employers that pay more/offer better conditions.

Finally, Gov. Cuomo has declared a state of emergency in NYS.  This is probably not going to be good for business.

Any thoughts?