Ultimate Electronics' owner Mark Wattles, who acquired 32 of 62 Ultimate and SoundTrack stores for $47 million in a bankruptcy auction last month, said that he will likely stay the course with the remnants of the regional A/V chain, albeit from a smaller and more manageable store base.
Wattles also appointed a new president, Randall Baunberger, who formerly ran Hollywood Entertainment's Game Crazy stores.
Apart from a major inventory stock-up, plans call for the stores to remain essentially unchanged — at least for the short term — both in name and business model, according to Ultimate Acquisition Partners (UAP), Wattles' acquisition entity. The acquired stores are located in the metropolitan areas of Denver, Colorado Springs, Boulder and Ft. Collins, Colo.; Minneapolis; Las Vegas; Phoenix; Albuquerque, N.M.; Oklahoma City and Tulsa, Okla.; St. Louis, Mo.; and Wichita, Kan.
Substantially all employees at Ultimate Electronics' corporate headquarters and in the 32-store group will transfer to UAP, which is owned by Mark Wattles Enterprises, LLC, an investment vehicle that specializes in public and private companies within the consumer products and retail sectors. Wattles will serve as UAP's chairman and CEO.
The remaining 30 stores, which Ultimate has previously earmarked for closure, were auctioned off to a liquidation group that includes SB Capital, Tiger Capital and Gordon Brothers. The consortium is paying 77.9 cents on the dollar for the stores' assets.
After receiving support from lenders and the approval of a federal bankruptcy court, Wattles bought the surviving stores for $43.7 million in cash and a $3.5 million promissory note in a going-concern auction. The purchase will give the specialty chain a new lease on life and save about 1,000 jobs while erasing most of its debt. Wattles still owes lenders, lead by Wells Fargo, about $11 million in bankruptcy financing and fees, and also assumes about $2 million in leases and contracts. He will also lease back the company's corporate headquarters, a distribution center and flagship store — the only real estate previously owned by Ultimate Electronics — for $1.5 million a year.
Wattles, the founder and former chairman/CEO of Hollywood Video, financed the acquisition with his own resources. He recently sold his remaining shares in the video rental chain for about $53 million.
In his first public statement following the auction, Wattles noted that Ultimate's business model is sound, and laid the blame for its insolvency on overexpansion by prior management. “In my opinion, [Ultimate's] past financial problems were created by not being prepared [to execute] challenges related to rapid store growth. We now have a great management team experienced in high growth retail, a solid base of core stores, and employees who are fanatics about audio/video.”