Zumiez Makes $7.2 Million Bid For Active

On May 15, The Active Wallace Group (dba Active Rideshop) made a motion for an order of approval of the sale of substantially all its assets to Active Acquisition, Inc., a wholly-owned subsidiary of Zumiez, Inc.

The terms of the motion state that Zumiez would purchase all of Active’s inventory for less than market costs, as well as pay $100,000 per store acquired. At the time of filing Chapter 11, Active operated 21 stores.

Zumiez, Inc. (ZUMZ) owns 350 stores in 31 states. The company’s sales and net income for fiscal year ending 2009 were $408.7 million and $17.2 million respectively. According to the court documents, as of January Zumiez had more than $33 million in cash.

The terms of the proposed sale are as follows:

Based on the offer made by Zumiez, Active proposes to sell its assets for a total consideration of up to as much as $7.2 million cash, depending upon the outcome of Zumiez valuation of inventory and determination of number of stores to acquire. The total consideration offered to be paid by Zumiez in this case is based on the following formula:

1.) Inventory valued at the lower of cost or market, as determined by an appraiser hired by Zumiez;

2.) $100,000 per store to be purchased by Zumiez; and

3.) Assumption of gift card certificates up to $1.3 million, with total consideration to be adjusted if gift card liability is in excess of $1.3 million.

According to Active’s books, the cost of all its inventory was approximately $5.2 million as of March 30, 2009. Because the inventory is dates, Active believes the inventory to be worth significantly less than cost. Active expects to determine the market value of its inventory by June 10, 2009.

Zumiez has expressed interest in 20 of the 21 stores, and the final bid will be filed on June 22, 2009.

Another stipulation of the deal is that Zumiez has requested to be paid a break-up fee of $250,000. This fee covers the costs associated with moving on a deal of this size in such a short amount of time.

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