RVI Dumps Value City Chain
By Staff -- Home Textiles Today, 1/28/2008 12:00:00 AM
Columbus, Ohio —
A bit more than a year after Retail Ventures Inc. (RVI) retained advisors to explore strategic alternatives for the sagging Value City Department Stores operation, RVI will take a loss as it transfers an 81% majority interest in the chain to a consortium known as VCHI Acquisition Co.
The news follows an 8-K filing with the SEC on Dec. 17 in which RVI said it had entered into a non-binding indication of interest with an unidentified third party for disposition of Value City. VCHI Acquisition is a newly formed entity owned by VCDS Acquisition Holdings, LLC, Emerald Capital Management LLC and Crystal Value, LLC.
RVI said it "will receive no net cash proceeds from the sale, will pay a fee of $500,000 to the purchaser, and anticipates recognizing an after-tax loss on the transaction." RVI has agreed to "advance certain expenses" which VCHI will see are reimbursed by Value City within 30 days of closing.
RVI also has issued warrants to VCHI Acquisition to purchase 150,000 shares of RVI common stock, at an exercise price of $10 per share, and exercisable within 18 months of closing.
Of the three chains operated by RVI, discounter Value City has been losing money steadily. In its recent third-quarter report, RVI said Value City had a nine-months operating loss of $44.2 million, compared to the loss of $31.0 million for the year-prior period. Sales had fallen 9.6%, with comps down 10.0% for the period.
The Filene's Basement off-price chain at that time posted a year-to-date operating loss of $16.0 million, while the DSW Footwear division showed an operating profit of $80.3 million.
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