Tops Markets to pay $85M for Penn Traffic’s supermarkets; bankruptcy court approval sought

Tops to pay $85M for Penn Traffic’s supermarkets

ROCHESTER, N.Y. — Tops Friendly Markets said Friday it is buying all 79 stores run by bankrupt rival Penn Traffic Co. for $85 million in cash, a move that would deepen its roots in New York and Pennsylvania and extend its reach into other Northeastern states.

Tops, a 76-store chain based in suburban Buffalo, said its bid has been accepted by Syracuse-based Penn Traffic and recommended to the U.S. Bankruptcy Court in Wilmington, Del., for approval. A judge met with lawyers for two hours Friday to discuss the proposed deal, then adjourned the hearing until Monday.

“The court proceeding went as expected, and our goal to see a bid chosen that will save the greatest number of stores and jobs is on track,” said Sen. Charles Schumer, D-N.Y.

Along with its cash offer, Tops said it would eliminate about $100 million in unsecured claims against Penn Traffic’s estate. That includes a $72 million claim for withdrawal liability from the United Food and Commercial Workers Union, which represents all of Tops’ work force and about 85 percent of Penn Traffic’s.

Penn Traffic filed for bankruptcy in November and moved to sell most or all of its assets. It operates 79 P&C, Quality Markets and BiLo stores in New York, Pennsylvania, Vermont and New Hampshire and employs nearly 5,800 people.

Tops employs more than 10,000 people. It operates 67 company-owned supermarkets and five franchise outlets in western and central New York, plus four supermarkets in Erie, Sayre and Bradford in northwestern Pennsylvania.

Some Penn Traffic stores could fold because “it’s not financially prudent to keep them open,” Tops’ chief executive, Frank Curci, said in an interview with The Associated Press. “There may be some that are too far away for us. But the majority will stay open.”

He added the company expects to keep “the majority, if not all,” of Penn Traffic’s workers.

“Our footprints are very similar actually,” said Curci, Tops’ CEO and president. “We sit in contiguous markets, we understand their stores, we think we know their customer base and their needs pretty well. But this does jump start our growth.

“Our objective is not to be the biggest, it’s to be the best. And we think this allows us to go a long way toward that goal. We’ll have a bigger company, better leverage … a flexible format that can fit in any size market.”

Penn Traffic has struggled financially for more than a decade. It emerged from a nearly two-year bankruptcy reorganization in April 2005, but continued to lose money. It lost $17.6 million in 2008 and nearly $42 million in 2007. It also went through bankruptcy reorganization in 1999.

Tops has been owned by Morgan Stanley Private Equity since 2007. Bank of America Merrill Lynch and Morgan Stanley are acting as its financial advisers.

Price Chopper, a Schenectady-based company with 119 stores in six Northeastern states, had offered $54 million in December for 22 of the 46 P&C stores being auctioned. It is objecting to the proposed sale to Tops.

“It looks like we have avoided the disaster of liquidation,” said Schumer, who had asked Penn Traffic’s largest lender, GE Capital, to extend a Dec. 21 deadline for potential buyout offers until the end of January. “We are on the cusp of preserving about 6,000 jobs and shopping options in rural communities.”