Big Lots Files for Bankruptcy, Agrees to Be Acquired by Investment Firm
Closeout retailer Big Lots Inc. has entered into a sale agreement with an affiliate of investment firm Nexus Capital Management LP, under which Nexus has agreed to acquire substantially all of the company’s assets and ongoing business operations. To ease the transaction, Big Lots, along with each of its subsidiaries, has initiated voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware. During and after this process, the retailer will continue to welcome customers at its stores and online.
“We are proud of the work we do every day across Big Lots to provide our customers with unmistakable value and exceptional savings, as well as building stronger communities through our philanthropic efforts,” said Big Lots President and CEO Bruce Thorn. “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.”
Added Thorn: “We appreciate the tremendous loyalty of our customers, and our core purpose of helping them ‘Live BIG and Save LOTS’ has never been stronger. As we move through this process, we remain committed to offering extreme bargains, enabling easy shopping in our stores and online, and providing an outstanding customer experience. We are grateful for the hard work and dedication of our associates who remain focused on delivering the best service possible for our valued customers, and we deeply appreciate the partnership of our vendors as we start a new chapter for our business.”
“We are excited to have the opportunity to partner with Big Lots and help return this iconic brand to its status as America’s leading extreme-value retailer,” noted Evan Glucoft, managing director of Los Angeles-based Nexus. “The Big Lots business has incredible potential, and we are confident that its greatest days are ahead.”
Since the pandemic, Big Lots has been ramping up strategic initiatives focused on improving sales and boosting its long-term performance and profitability. According to the company, it has been adversely affected by such recent macroeconomic factors as high inflation and interest rates that are beyond its control. These economic trends have been particularly challenging to Big Lots, since its core customers lowered their discretionary spending on the home and seasonal product categories that account for a significant portion of the company’s revenue.
A broad strategic review conducted by Big Lots’ board of directors found that entering into the agreement with Nexus and initiating a court-supervised sale process would be the best way forward to maximize value and ensure continued operations.
As part of the court-supervised sale process, Big Lots will continue to assess its operational footprint, which will include closing more store locations than the approximately 300 locations in California and elsewhere that the company is already shuttering. The retailer will also continue to evaluate and optimize 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.”
Under the terms of the sale agreement, Nexus will be the “stalking horse” bidder in a court-supervised auction process in which the proposed transaction is subject to higher or otherwise better offers, court approval, and other conditions. According to the sale agreement, if Nexus is the winning bidder, the parties anticipate closing the transaction during the fourth quarter of 2024.
In connection with the court-supervised process, Big Lots has secured commitments for $707.5 million in financing, including $35 million from some of its current lenders, in the form of a post-petition credit facility. Upon court approval, the facility, together with cash generated from Big Lots’ ongoing operations, are expected to provide sufficient liquidity to support the company during the sale transaction.
Big Lots has also filed a number of customary motions seeking court approval to continue supporting its operations, among them continued payment of employee wages and benefits, and payments to critical vendors in the ordinary course of business. The company expects to receive court approval on these motions and to pay vendors in full under normal terms for any goods and services provided after the filing.
For the sale agreement, Davis Polk & Wardwell LLP is legal counsel, Guggenheim Securities LLC is financial advisor, AlixPartners LLP is restructuring advisor, and A&G Real Estate Partners is real estate advisor to Big Lots, while Kirkland & Ellis is legal counsel to Nexus.
Further information about the Big Lots’ restructuring and sale process can be found at a dedicated website.
Bringing up Big Lots’ preliminary second-quarter 2024 performance, Thorn observed: “Despite a challenging consumer environment and financial pressures facing our business, we are pleased to have achieved underlying comp sales, gross margin and operating expenses in line with our guidance. Underlying comp sales improved sequentially relative to Q1 on a year-over-year basis, and gross margins significantly improved, driven in part by advancing our five key actions, particularly through increasing our extreme-bargain offerings. Additionally, Q3 to date is off to a good start, with a significant sequential improvement in underlying comp sales relative to Q2, as well as underlying gross margin expansion versus last year. We expect the positive momentum to continue into the back half of the year.”
The company will report its full second-quarter results as part of its upcoming 10-Q filing, which is due to be filed on Sept. 12.
Big Lots also revealed that it was informed by the New York Stock Exchange (NYSE) that it’s not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price of the company's common shares was under $1 over a consecutive 30-trading-day period. This notice doesn’t result in the immediate delisting of Big Lots’ common shares from the NYSE.
Columbus, Ohio-based Big Lots Inc. operates more than 1,000 stores in 48 states, as well as an e-commerce platform with expanded fulfillment and delivery capabilities. The company is No. 59 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America.
