PHOENIX -- Circle K Corp., the nation's second-largest chain of convenience stores, announced Monday it has agreed to be sold for $425 million as part of a reorganization plan following nearly two years in bankruptcy.
The proposed buyer, an investor group composed of Investcorp S.A., Corporacion CNL S.A. and RAK Development Co. Inc., provides for the chain to continue current operations.
Circle K, which filed for Chapter 11 bankruptcy protection in May 1990, has long delayed filing of a reorganization plan. Creditors and bondholders are owed more than $1 billion.
The Phoenix-based chain's last major announcement came in December, when it said it planned to close about 1,500 of the 3,700-stores, which produce annual sales of about $3.6 billion. Circle K President John Antioco said Monday the cutbacks in operations will continue.
'We are continuing to take new steps to streamline operations, revamp and remodel facilities and remake Circle K into a leaner, more efficient, more profitable company with excellent prospects and enhanced opportunities for employees in the future,' Antioco said.
Circle K said Monday that under the plan, all its priority claims and post-bankruptcy claims will be paid in full from existing company resources or in the ordinary course of business. It said proceeds from the deal will be distributed among the remaining creditors, based upon the legal priority of their claims.
It also said that 6 percent of the acquisition proceeds would go to unsecured creditors, which include the holders of its publicly held debentures, and 2.25 percent would go to common and preferred stockholders.
However, it also said that if the senior creditors do not agree, the unsecured creditors and stock holders will receive nothing under the plan.
'For Circle K, the plan has two primary advantages,' said Circle K Chairman Bart Brown. 'First, it would provide our creditor groups with substantial value, in cash; and second, it would enable the company to continue as a vigorous competitor in the convenience store industry.'
The investor group, called CK Acquisitions Corp., can cancel the deal during the next two months.
Circle K said Investcorp acts as an intermediary on deals in both the U.S. and Europe. Its U.S. investments have included Carvel, Color Tile, Saks Fifth Avenue, Gucci and Tiffany's.
Corporacion CNL S.A. is a Barcelona, Spain-based public company with interests in insurance, leisure, banking, media and real estate. RAK is a U.S. real estate development firm.
Circle K said Monday it filed the plan on Friday in U.S. Bankruptcy Court in Phoenix. It said the investor group would buy the company through a stock-purchase agreement for $395 million to be paid at closing, and the remaining $30 million to be paid thereafter.
Circle K also said the investor group will assume some of Circle K's liabilities. It said all existing shares of common and preferred stock would be canceled and new shares of common stock would be issued to CK Acquisitions.
Circle K stock was unchanged at $1.125 a share in mid-session trading Monday on the New York Stock Exchange. The stock traded at above $16 in 1989.
Circle K operates in 32 states concentrated in the Sunbelt. Its chief competition is 7-Eleven Corp., which is owned by Southland Corp., which also emerged from Chapter 11 last year.
Dallas-based Southland is now largely controlled by its Japanese affiliates, Ito-Yakada Co. and the Seven-Eleven Japan Co.
