Bankrupt county supermarket chain winding down

Haggen, the supermarket chain based in Bellingham, is putting its 32 original stores up for auction, in what looks to be the final phase of a massive restructuring and bankruptcy process. Six of the stores are located in Whatcom County.

On November 9, Haggen scheduled a hearing at the U.S. Bankruptcy Court in Delaware to propose auctioning off its 32 original stores on January 8. Haggen owns four stores in Bellingham and one in Ferndale. The company also owns a pharmacy on Cordata Parkway in Bellingham. The auction would take place January 8.

The sale of the core stores is the latest step in the Haggen bankruptcy process. The company filed for Chapter 11 earlier this year, after its effort to convert 146 grocery stores in western states under their banner fell apart.

In November 2014, Haggen entered negotiations to purchase 146 Albertsons supermarkets for $300 million. Albertsons was in the midst of a $9.6 billion merger with Safeway in an ambitious effort to become one of the largest supermarket chains in the country. The Federal Trade Commission required Albertsons to sell off 168 of its West Coast stores to ensure a competitive playing field in those markets, and Haggen executives saw the chance for the company to become a major player. The deal was finalized in February 2015.

The company attempted to rebrand the newly acquired stores over 15 weeks, as per the acquisition agreement. Some supermarket industry experts believed Haggen needed a minimum of six months to determine proper pricing and do due diligence. One analyst, David Livingston, founder of DJL Research, described the company as “just clueless from the very beginning. You couldn’t do worse than what they’re doing,” he told the LA Times in a September 8 interview. Most stores were closed for about 48 hours while crews replaced signage and restocked the shelves.

Problems began to arise almost immediately. In July, Albertsons filed a $41.5 million lawsuit against Haggen, accusing the company of fraud for failing to pay for inventory. Haggen counter-sued in September, asking for $1 billion in damages and accusing Albertsons of sabotaging the transition. According to the court documents, Haggen alleged that Albertsons failed to properly train employees for the transition, as they had agreed in the acquisition, which led to confusion and dissatisfaction amongst longtime customers and employees.

Haggen alleged that Albertsons raised prices shortly before the transition and over-ordered perishable items. Many seasoned and key employees accepted transfers to other Albertsons stores, leaving less-experienced workers to see the transition through.

Haggen closed 27 stores in August, 26 of which were newly acquired Albertsons stores.  On September 24, the company announced plans to file for bankruptcy and  sell all but the 32 Pacific Northwest core stores the company owned before the acquisition. 

In October, Haggen signed tentative purchase agreements with Gelson’s Markets and Smart & Final to buy 36 of its stores in California and Nevada under a “stalking horse package bid” process. This allows distressed companies to avoid been preyed upon by other companies seeking to submit ‘low ball’ bids at auction. The stalking horse bid essentially sets a floor price. Gelson’s purchased 8 stores for $36 million, and Smart & Final paid $56 million for 28 stores.

Haggen announced on November 13 that the sale was approved by the U.S. Bankruptcy Court for Delaware. It also announced that it had accepted bids for 55 other stores for more than $47 million. These were Washington, Oregon, Arizona, California and Nevada non-core stores that went up for auction November 9–10. Albertsons submitted the highest bids on 34 of the stores, 12 of which are in Washington. These sales will be submitted for court approval on November 24.

Forty stores didn’t receive bids at all.

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