Big Lots Agrees Sale To Nexus, Files For Bankruptcy

(RTTNews) - Discount home goods retailer Big Lots, Inc. announced that it has entered into an agreement to be acquired by an affiliate of Nexus Capital Management LP. To facilitate the deal, the company, together with its units, initiated Chapter 11 Bankruptcy proceedings in the U.S. Bankruptcy Court for the District of Delaware.

Further, regarding its second-quarter performance, Bruce Thorn, President and Chief Executive Officer, stated, "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... 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."

The company, which has been struggling in recent quarters with poor financial performance, said it has implemented the latest plan to accelerate business optimization and achieve profitability in 2025.

Big Lots' latest move comes amid the ongoing struggles in retail sector that has been forcing several major chains to file for bankruptcy protection with a view to reorganizing or liquidating and closing their operations.

In a statement, Big Lots said the acquisition by Nexus will include substantially all of Big Lots' assets and ongoing business operations.

Under the deal terms, Nexus will serve as the "stalking horse bidder" in a court-supervised auction process, according to which, the proposed transaction is subject to higher or otherwise better offers, Court approval, and other conditions. If Nexus is deemed 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 of financing, including $35 million in new financing from certain of its current lenders.

Since the pandemic, after being adversely affected by recent macroeconomic factors such as high inflation and interest rates that are beyond its control, Big Lots has beeing considering strategic initiatives focused on improving sales and boosting its long-term performance and profitability.

The company said its underlying performance has been improving, yet the Board of Directors conducted a broad strategic review of alternatives, following which a deal was reached with Nexus, and a court-supervised sale process was initiated.

As part of the court-supervised sale process, the company is continuing to assess its operational footprint, which will include closing additional store locations. Big Lots will also continue to evaluate and optimize its distribution center model.

Earlier in July, the discount retail chain with about 1,400 stores, in a U.S. Securities and Exchange Commission filing, had announced closure of several stores across the U.S., citing inflation and heavy competition as the reason.

According to Thorn, these actions will enable the firm to move forward with new owners who believe in its business and provide financial stability.

"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", he added.

During and after the Chapter 11 process, Big Lots will continue to serve customers at their nearest store location or online at biglots.com.

In the transaction, Davis Polk & Wardwell LLP is serving as legal counsel, Guggenheim Securities, LLC is serving as financial advisor, and AlixPartners LLP is serving as restructuring advisor to Big Lots.

The company also announced that it was notified by the New York Stock Exchange that it is not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price was less than $1.00 over a consecutive 30 trading-day period.