A US court has approved the procedures governing the proposed sale of Tesco’s loss making US supermarket chain Fresh & Easy Neighbourhood Market, potentially saving an estimated 4,000 jobs.
At a hearing in Wilmington, Delaware last week, US bankruptcy judge Kevin Carey gave the go-ahead for an auction on 19 November. The lead bidder is believed to be an affiliate of Los Angeles-based holding company Yucaipa Cos.
All potential buyers must submit an offer by 15 November. The company will hold the auction if it receives a competing qualified bid, after which a court approval will be sought at a hearing on 21 November for the auction winner. Yucaipa has agreed to take over some 150 of the stores together with Fresh & Easy’s distribution facility in Riverside, California.
The company operates 167 stores throughout the western US.
Under the proposed agreement, an affiliate of Tesco would lend Yucaipa’s associate US$120m to help fund the acquisition. The UK supermarket would receive warrants to buy as much as 10 per cent of the equity in the reorganised chain. Fresh & Easy would get a 22.5 per cent stake in the new chain if the Yucaipa affiliate’s offer prevails.
The Yucaipa buyer has also offered to take on some of Fresh & Easy’s liabilities, valued at US$130m in court papers.
Fresh & Easy has never made a profit, instead losing an average of US$22m in the year ended February 2013. The chain sought bankruptcy protection on 30 September, listing debt of as much as US$1bn and assets of up to US$500m according to court papers.
Tesco blamed the failure of the chain on the economic downturn and falling real estate prices.
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