Liquidator wins Tower auction
UPDATE: Retailer could be closed by the end of the year
By Susanne Ault -- Video Business, 10/9/2006
OCT. 9 | Liquidator Great American Group just outbid Trans World Entertainment to acquire Tower Records and is set to dismantle the legendary music brand.
In confirming the sale, Great American Group president and partner Andy Gumaer said the company bid $134.5 million to purchase Tower’s inventory and fixtures at its 89 U.S. stores.
Great American values its product purchase at $250 million. The company immediately began “going out of business” sales across the Tower chain Saturday.
All books are discounted 20%, magazines 30% and CDs/DVDs 10%. Prices will likely be slashed further next week. All vendors have ceased shipping new product to Tower, and sales will involve only existing inventory.
Tower’s real estate and lease holdings and online component Tower.com were sold to different entities separate from Great American, said Gumaer.
Crystal Capital and Retail Consultant Services bought Tower leases. San Francisco-based music memorabilia company Norton LLC paid $3.8 million to secure Tower.com and its new download service complement TowerRecordsDigital.com.
Norton may have changed its mind, however, and tried to back out of its deal, according to bankruptcy court filings late last week. Tower attorneys filed an emergency motion asking the court to compel Norton to go through with its intended purchase.
Norton, however, opposed Tower’s position, noting that before it agrees to acquire the online assets, it only wants to be assured access to current Tower Web site customer information.
Further court hearings were being set up late last week to hash out Norton’s issues.
In a related wrinkle, rival Tower bidder Trans World may cry foul if Norton winds up not buying the Web holdings. To win the Tower auction, Norton and Great American teamed up to present a consortium bid that proved unbeatable. Runner-up Trans World lost by $500,000, and may have been able to prevail if Norton had never pitched in the $3.8 million into the total $134.5 million bid.
It’s not clear what fates are in store for Tower’s key locations, such as its revered Sunset Strip Los Angeles outlet, and Tower.com’s new download service TowerRecordsDigital.com. As of Monday, the digital site was still operational.
Also not part of Great American’s acquisition is Tower’s international licensee stores.
A Tower spokesman did not comment by deadline.
Many DVD and CD suppliers had been rooting for Trans World and Radius Equity Partners to prevail in the bidding process because of their likelihood of maintaining Tower as a retailer.
Citing Tower attorney Peter Gurfein, a Friday AP report said Trans World lost the auction by just $500,000.
Gumaer doesn’t believe the industry should blame Great American for Tower’s demise.
“Essentially, the advent of the Internet, iPods and other things of that nature is what has hurt that business significantly,” Gumaer said. “We’re just doing a service [of liquidating] that someone was going to have to do. We have nothing to do with the changes of the music business or the management [decisions] of Tower.”
The “going out of business” sales should span about six weeks, indicating that Tower will likely disappear prior to the holiday season.
Great American was one of 16 bidders looking to acquire Tower, which filed for bankruptcy several weeks ago.
Past liquidations Great American has overseen include FAO Schwartz, Wherehouse Records and Montgomery Ward.
