'Stalking Horse' C&S Agrees to AWI Asset Purchase

After months of speculation, the fate of Associated Wholesalers Inc. (AWI) is one large step closer to being resolved with an asset purchase agreement tendered with C&S Wholesale Grocers, which will serve as a stalking horse bidder in a court-supervised auction to acquire all of AWI’s assets, including its White Rose distribution business.

To facilitate the transaction process, AWI filed for Chapter 11 and plans to complete the sale process under Section 363. The Robesonia, Pa.-based co-op and its Carteret, N.J.-based White Rose subsidiary are expected to continue operating in the normal course during the sale process. The asset purchase agreement by C&S is subject to higher and otherwise better offers, among other conditions.

The news of AWI's bankruptcy filing and C&S's stalking horse stance puts to rest ample discussion and speculation in recent months among AWI and White Rose associates and local trading partners throughout central and eastern Pa., and metro New York, many of which were becoming increasingly frustrated by the lingering, complex scenario that first publicly surfaced in late spring, when AWI's longtime former president and CEO, J. Christopher Michael departed from the company after 34 years.

In a joint statement, Joyce Fasula and Mike Rothwell, AWI's respective chairwoman and vice chairman, said: “We believe that the asset purchase agreement with C&S is in the best interest of AWI and its stakeholders. After conducting a thorough process, which included the exploration of a range of alternatives and reaching out to multiple interested parties, we determined the best course of action for AWI was to enter this agreement with C&S and to undertake the court-supervised sale process.”

In conjunction with the proposed transaction, AWI said it received a commitment for “debtor in possession” (DIP) financing to support its continued operations during the pendency of the sale process; C&S has also made a commitment to participate in the DIP financing package.

“As we move through this transaction process, we will continue to focus on serving our customers,” said Matt Saunders, AWI president and CEO, who noted the co-op "intend[s] to work closely with our suppliers and the winning bidder to help ensure that our customers continue to receive the level of service they expect."

For its part, officials from Keene, N.H.-based C&S are clearly pumped to add AWI's and White Rose's retailers and suppliers to its fold, which will expand its "footprint and enhance our significant capabilities in servicing independent grocers,” said Rick Cohen, chairman and CEO of C&S. "AWI and White Rose have a terrific customer base," Cohen continued, "and their distribution capabilities are a natural complement to our existing portfolio. We believe we are strongly positioned to provide all of their customers with the goods and services they need to successfully run and even grow their businesses.”

As for the continued support of its business operations during the transaction process, AWI has filed a number of customary motions seeking court authorization, including the continued payment of employee wages, salaries and health benefits without interruption. It has also asked for authority to continue existing customer programs and intends to pay suppliers in full under normal terms for goods and services provided after the filing date of Sept. 9, 2014.

The proposed transaction with C&S – which was honored as PG's 2013 Wholesaler of the Year and which is the nation's largest wholesale grocery supply company, supplying some 5,000 stores from more than 50 locations across the country – is being completed per Section 363 of the U.S. Bankruptcy Code and is subject to higher and otherwise better offers to purchase any or substantially all of AWI’s assets, court and antitrust approvals, any other requisite legal approvals and other customary conditions. As such, the parties said there can be no assurance that the proposed transaction will be consummated.

Court documents and additional information can be found at a dedicated website, which is administrated by AWI’s claims agent, Epiq Systems.

Saul Ewing LLP and Rhoads & Sinon LLP are serving as legal advisors, Lazard Middle Market is serving as financial advisor, and Carl Marks Advisors is serving as restructuring advisor to AWI.