Bob Bernstein, the Kansas City advertising mogul who founded spa and salon retailer Beauty Brands in 1995, submitted a bid on Wednesday to buy several Beauty Brands stores out of bankruptcy.
Absolute Beauty LLC, a business entity controlled by Bernstein and his son and former Beauty Brands president David Bernstein, said in a U.S. Bankruptcy Court filing in Delaware that it was prepared to buy 23 Beauty Brands stores and offer continued employment to 875 people.
Beauty Brands, which is primarily owned by a California private equity firm, filed for Chapter 11 bankruptcy protection from its creditors on Jan. 7, announcing at the same time that it had an asset purchase agreement with Illinois-based Hilco Merchant Resources LLC. The arrangement with Hilco is known in bankruptcy as a stalking-horse bid: Hilco would buy the operating assets of Beauty Brands unless someone else had submitted a higher and better offer.
So far the Bernsteins are that someone else. And their filing argues that their bid is superior to the one put forth by Hilco.
Absolute Beauty’s bid offers $4.65 million to buy 23 Beauty Brands stores and assume their leases. Part of the bid also includes taking on the lease of a Beauty Brands distribution center.
Among the stores Absolute Beauty intends to take over are ones in Overland Park, Lee’s Summit, Lawrence, the Northland, the Country Club Plaza, Liberty, the Legends Outlet Mall, Independence and Shawnee. Other locations include those in the St. Louis area, Topeka, Iowa and Texas.
If the Bernsteins’ bid for the 23 stores is successful, the remaining stores not purchased may close as Absolute Beauty claimed that Hilco was looking toward liquidating the retail chain.
Absolute Beauty argues that its bid represents a premium over what Hilco offered to buy in store inventory.
“Absolute Beauty’s proposal is unequivocally higher and better than Hilco’s liquidation bid,” the company’s filing said.
Bob Bernstein declined to comment Wednesday. An attorney representing Absolute Beauty was not immediately available for comment. Hilco representatives were not immediately available for comment.
Bernstein is a longtime advertising executive with Kansas City-based Bernstein-Rein. He is credited with inventing the McDonald’s Happy Meal and had Walmart Stores as a client for decades. Beauty Brands expanded to 55 locations in 12 states with 1,800 employees before Bernstein sold a majority interest to TSG Consumer Partners in 2014.
Bernstein indirectly owns 5.3 percent of the outstanding equity interests in Beauty Brands, and is a landlord for nine of its stores and its distribution facility in Lenexa.
Beauty Brands’ fortunes have not fared well since the 2014 sale. In December, the company announced it was closing 25 stores and downsizing staff.
Wednesday’s filing revealed that the Bernsteins in December sought to buy “a significant portion” of the Beauty Brands business. About three days later, the company told the Bernsteins that they needed to submit their proposal by Dec. 18 and that it would require a “significant price” increase over a liquidation plan negotiated by Hilco.
The Bernsteins submitted a plan to buy 28 stores and were ready to pay a 10 percent deposit on the sale.
“This was met with complete silence,” Absolute Beauty wrote in its filing.
The Bernsteins were later told that the company would proceed with bankruptcy.
Absolute Beauty argues that its bid offers to pay more for store inventory than Hilco’s stalking horse bid and that its bid has value in excess of $10 million in the aggregate, compared to $9.3 million for that of Hilco’s.