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Venator sheds more stores
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September 22, 1998: 12:08 p.m. ET
Sporting-goods retailer will sell German Woolworth operations for $552M
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NEW YORK (CNNfn) - Struggling athletic retailer Venator Group Inc., still smarting from its decision to call off a planned mega-merger with The Sports Authority, said Tuesday it would sell its German general-merchandise operations for $552 million and repurchase up to $200 million in the company's common stock.
Venator, formerly Woolworth Corp., has struggled in recent months to jump-start a sagging athletic-goods business that has been hit hard by a cyclical downturn across the industry.
By spinning off its 357-store German Woolworth operations, Venator will effectively exit its International German Merchandise operations, further distancing itself from the now-defunct Woolworth name.
The company described the strategy as "the last major component" of a reorganization that began in 1995.
Venator said it expects to net after-tax proceeds of $440 million from the sale, described as a management-led buyout backed by London-based Electra Fleming.
Venator will also record an after-tax gain on discontinued operations of about $16 million, or 12 cents a diluted share. The sale is expected to close by year's end, pending regulatory approval and other closing conditions.
Whether the spin-off will actually help revive Venator remains unclear. Analysts say the entire athletic-retailing industry has been mired in the doldrums since the second half of 1997, and that the difficulties seem unlikely to abate before the end of the year.
Reflecting the hardships, on Aug. 20, Venator posted a second-quarter net loss of $13 million, or 9 cents a share.
On that same day, Venator shares slipped further below the $20.50 per share "walk-away" price specified in its proposed $749 million marriage with The Sports Authority, the United States' leading sporting-goods retailer.
Under the walk-away provision, shareholders could opt out of the deal if Venator's share price slipped below the $20.50 mark for a 20-day period within 23 days prior to a meeting of The Sports Authority's shareholders.
Venator preempted such a vote, however, when it unilaterally terminated the deal on Sept. 10, citing poor market conditions.
Venator also announced earlier this month that it planned to close its 570 Kinney and Footquarters shoe stores and take a third-quarter charge of $173 million, or $1.28 a diluted share.
At the same time, the retailer said it would launch a new athletic outlet chain based on about 35 Footquarters locations and 40 existing Foot Locker and Champs Sports store outlets.
On the same day, Standard & Poor's, a leading credit-rating agency, placed Venator on Creditwatch, citing its earnings warning and uncertainty over the timing and scope of Venator's recovery.
Venator also said Tuesday its board had authorized an investment of up to $200 million to buy back shares of common stock as market conditions warrant.
The company expects to fund the buyback with money from the sale of the German merchandise stores, the previously announced sale of its German headquarters building, an inventory reduction program, and the repayment of short-term debt.
Venator (Z) shares were up ¼ at 10-1/16 in Tuesday morning trading on the New York Stock Exchange, well below the 52-week high of 27-1/4.
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Venator
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