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PHAR-MOR Judge rejects $843,000 bid

By Don Shilling

Wednesday, October 10, 2001

Phar-Mor said it hit a home run with a $23 million auction of prescription files.
YOUNGSTOWN -- A bankruptcy court judge rejected an offer of $843,000 that was to be added to the $23.4 million that Phar-Mor raised at an auction of prescription files.
Judge William Bodoh of U.S. Bankruptcy Court here ruled Tuesday that accepting the bid would violate the rules of the auction and jeopardize how future auctions are viewed.
Stop & amp; Shop Supermarket Co. requested the hearing to review the results of an auction last week of the prescription files at 63 Phar-Mor stores that are closing.
What happened: Stop & amp; Shop wanted to buy nine of the stores as a group. It submitted a bulk bid, which was unsuccessful because individual bids for the nine stores were higher.
Shawn Riley, a Stop & amp; Shop attorney, said his company later increased its bulk bid to $3.9 million for the nine stores, or $843,000 more than the total of the individual bids. Rules stated bulk bids could not be increased after individual bids were completed.
Riley said it was unfair that individual bidders were informed how much they needed to bid to beat Stop & amp; Shop's bulk bid. Target bid $932,000 for the ninth store, which was significantly higher than any other bid, just in order to beat Stop & amp; Shop, he said.
Joe Hutchinson, an attorney for the unsecured creditors committee in Phar-Mor's bankruptcy case, said he understood the need for following auction rules but added that the committee wants to see as much money as possible in Phar-Mor's estate. He suggested that perhaps a second auction should be held.
Michael Gallo, a Phar-Mor attorney, said $843,000 is a lot of money, but the company wants to let the auction results stand. The rules of the auction encouraged spirited bidding and Phar-Mor doesn't want to jeopardize the $23.4 million that was raised, he said.
Pleased: Phar-Mor expected a minimum of $6 million from the auction and was hoping for $10 million to $12 million.
"The sale turned out to be a home run for the debtor," he said.
Stop & amp; Shop did win the bidding for three individual stores. The other six it was contesting were won by Kmart and Target. The bidding on files at 54 other stores weren't contested at the hearing.
Merchandise: A hearing was scheduled for this afternoon to approve a buyer for nonpharmacy merchandise at the 65 stores to be closed. This company then would sell the merchandise. Two of the 65 stores don't have pharmacies.
John Ficarro, Phar-Mor senior vice president, said the retail value of the merchandise is about $70 million, although the amount Phar-Mor will receive was expected to be less. Also, the companies that bought the prescription files are to buy the pharmacy inventories at cost.
Youngstown-based Phar-Mor is attempting to reorganize and emerge from bankruptcy court protection with 74 stores.