A bid by European sports company Head Sport to buy most of the assets of the bankrupt retailer Performance Bicycle has hit a snag, after the two parties disagreed on which assets were actually part of the auction.
Head Sport — which makes skis, tennis rackets and other sports equipment — had agreed last week to buy most of Advanced Sports Enterprises assets for nearly $22 million. Advanced Sports, which filed for bankruptcy last year, is the parent company of the Chapel Hill-based bicycle retailer Performance Bicycle.
The bid could have kept several Performance Bicycle stores open, as it included the retention of 65 stores across the U.S., a spokeswoman for Advanced Sports previously told The News & Observer. Performance Bicycle started clearance sales at all of its stores last year and also notified the state’s Commerce Department that it was planning on laying off its corporate staff in Chatham County due to its bankruptcy.
The court was set to consider the asset purchase agreements at a hearing on Tuesday, but the judge ruled to continue the hearing to Feb. 1, after a disagreement was revealed between Head Sport and Advanced. The disagreement was first reported by the trade publication Bicycle Retailer.
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“We’re in yet another round of wait-and-see,” Karen Bliss, a spokeswoman for Advanced Sports, wrote in an email to The N&O. “There’s no real statement to be made at this time.”
The main disagreement appeared to be over whether $9 million that Advanced Enterprises had on hand was considered part of the assets that Head acquired. Head’s lawyers contended it was, while representatives for Advanced and Wells Fargo — to whom Advanced owes some sum “north of $20 million” — said it was not, according to audio recordings released by the court.
Because of the disagreement, representatives for Head called for a re-auction to occur — but that could prove to be too costly and time-consuming for Advanced, its creditors said. Wells Fargo would be first in line to receive proceeds from Advanced, according to court documents. One representative for Advanced Sports called Head’s actions an example of “buyer’s remorse.”
“This is a gosh awful mess that has been created here,” U.S. Bankruptcy Judge Benjamin Kahn said in the audio files.
Attorneys for Advanced, which didn’t want a re-auction to occur, said the bankrupt retailer could look to accept a second bid from Taiwanese bike manufacturer Ideal — which actually put in a higher offer than Head’s at the auction last week. However, Kahn noted that Ideal’s bid was never labeled a backup bid and expressed concerns over allowing Advanced to accept that bid, if the agreement with Head fell apart.
For its part, Wells Fargo said it would not be in favor of a re-auction.
“This is an effort to either delay the process so that we have to renegotiate to retain their bid or they are looking to use this process to knock out an alternative bidder, which puts us in a position of deleverage, so that we have to auction again,” said Wells Fargo attorney Steven Fox, according to the audio recordings. “This is not in the interest of the bank to re-auction this ... or in the interest of the company.”
Kahn told the parties to negotiate an agreement in the next week and come before the court on Feb. 1.
Performance Bicycle’s history goes back more than 30 years, when it started as a bicycle catalog company. It has around 2,000 employees.
Advanced Sports Enterprises, the Philadelphia company that bought Performance Bicycle a little more than two years ago, filed for Chapter 11 bankruptcy protection on Nov. 16, listing debts of more than $100 million. Bicycle Retailer and Industry News estimated that Performance’s annual revenue was between $275 million and $280 million when it was purchased in 2016.
Along with Performance Bicycle, Advanced Sports also owns the bike brands Fuji, Kestrel, SE, Breezer Bikes and Tuesday Cycles as well as the retailer Bike Nashbar.