BREAKING NEWS: Clark to Sell Remaining Assets

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BREAKING NEWS: Clark to Sell Remaining Assets

By John Lofstock - 05/07/2003
OAK BROOK, Ill. -- It appears to be the end of the line for Clark Retail.

After being regarded as one of the up-and-coming convenience store and petroleum chains in the industry three years ago, Clark Retail Enterprises Inc. today said it would begin selling off its Clark-branded assets in a structured sale intended to maximize value for investors.

Financial troubles for Clark, and its parent company, Clark Retail Group Inc., first came to light last year after the Oak Brook, Ill.-based chain filed for Chapter 11 bankruptcy. The company said the move was necessary to "alleviate short-term debt" in the wake of declining fuel margins and weak gas supplies.

Excluded from the filing was Clark's White Hen Pantry Inc. subsidiary, which operates in Greater Chicago with approximately 250 outlets.

Subject to court approval, Clark said today's filing would allow it to hire an investment firm to manage the sale its direct assets, which includes nearly 1,000 On the Go, Minit Mart, and Oh! Zone convenience stores, gas stations and kiosks. This process will allow for both single site and cluster buyers who have an interest in the Clark assets.

In an interview with CSNews Online Wednesday, John Matthews vice president of corporate communications for Clark, said the company's main focus now is getting the most money it can out of its properties. "Our objective since filing for Chapter 11 protection has been to maximize the value of the estate and after working very closely with all of our constituents. [The sale of Clark's assets] was identified as the best option available to maximize estate value."

Matthews added that Clark is looking to complete the asset sale as quickly as possible.

Brandon Barnholt, Clark Retail's president and chief executive, expects Clark's units to garner significant interest, though he declined to identify any potential bidders.

"The company has a portfolio of very competitive assets and strong name brands," Barnholt said "We believe these assets have strategic value for the right operator, as well as upside earnings potential for a company not hindered by Clark's liquidity issues."

White Flag at White Pantry
Its exclusion from the October bankruptcy filing allowed White Hen's franchisees to continue operating as normal, but now the company likely will not be able to hold onto the subsidiary, considered a retailing gem in the Midwest, either. William Blair & Company has been separately retained to review all strategic options related White Hen. "White Hen is a very strong brand with a unique merchandising mix, heavily weighted to prepared food, with a franchise model that sets it apart from the industry," Barnholt said.

As part of its reorganization plan, Clark received $56.2 million in debtor-in-possession (DIP) financing from its largest shareholder, Apollo Management L.P., to support operations and the payment of vendors and employees. "Our stores and offices will continue to operate without interruption. Our management team will remain in place and our company's commitment to provide customers with consistent quality, selection and great value remains unchanged," Barnholt told CSNews Online in October.

Clark intends to work through this process carefully so that all alternatives can be properly evaluated, and the highest value can be achieved for the estate and its constituents. The company, which ranked 14th in the Convenience Store News list of Top 50 Convenience Store Companies, was the great consolidator of the Midwest, acquiring White Hen Pantry Inc., Wareco Services LLC and Minit Mart Foods LLC. In two years, the upstart retailer picked up 500 stores in eight deals, placing it among the elite c-store chains in the country with more than 1,300 units and $2.5 billion in annual sales.

But times have changed. Clark has been quiet the past 12 months as rivals Marathon Ashland Petroleum LLC, Alimentation Couche-Tard Inc. (ACT) and Krause Gentle Corp. step up their presence in the central United States. Moreover, many of Clark's suburban outlets are under increasing pressure as quick marts and gas pumps sprout in front of big-box competitors Costco, Dominicks and Meijer.

"The Chapter 11 process will provide us with the time and means to resolve its financial issues," Barnholt told CSNews Online in October. "This action will represent a new beginning that will allow a financially stable Clark to put the liquidity challenges of the past behind it, so that management can focus on operating the business and providing customers with even better levels of service and availability of product."

Unfortunately, market conditions dictated otherwise.