Thank you all for joining in on a very interesting conversation about the demise of JoAnn Fabrics. I felt a bit vindicated once I was reading your thoughtful comments. Also, I almost did bring up the decoration part of JoAnn's but ours in this area did less and less of that over the last 10 years. Ours truly became more of a Michael's with a bit more fabric.
That all said, I'm sure you heard by now but they decided to close 800 stores. How did that happen? So here is the nitty gritty I didn't get into last week. Here's how a bankruptcy goes (or at least the simplified version)
1. Bankruptcy is declared and a judge decides if the company has a good enough plan to become solvent.
2. If they don't, the court will put all the company's assets up for auction.
3. A stalking horse bidder is chosen to be the first bidder, getting incentives to buy the company at a set price.
4. If nobody bids against them. They get the company's assets.
5. But in JoAnn's case two companies came together to form a new liquidation company and placed a higher bid than the stalking horse bidder.
6. The new company specifically was formed to buy the assets cheaply and sell them at a profit.
It's a shame really. Sometimes a stalking horse bidder will get the company, reorganize it and make a profit. But not this time. The liquidation company was out to make a fast buck. A famous fictional character who did this was Richard Lewis of Pretty Women who was a corporate raider, buying companies only to break them up and sell their assets.
Anyways that's the scoop. I held out hope that it would survive but really it's just for sentimental value.
All stores are to be closed by May.
This just makes me sad.
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