Updated: This story was updated on Aug. 9 with a statement from GoDigital.
The Eastern Mountain Sports (EMS) retail brand may survive bankruptcy after the court on Wednesday approved a $5 million stalking horse bid from U.K.-based Mountain Warehouse for some of the remaining stores.
The seven stores and the assets included in the stalking horse agreement are in:
- Hadley, Massachusetts.
- Burlington, Vermont.
- Lake Placid, New York.
- Saratoga Springs, New York.
- West Lebanon, New Hampshire.
- Portsmouth, New Hampshire.
- Conway, New Hampshire.
“This prospect with a company that shares our values and commitment to the outdoor community marks an exciting opportunity for Eastern Mountain Sports,” said Dave Barton, president of EMS, in a statement. “EMS will continue to provide our customers with the best outdoor gear and experience while supporting our dedicated employees and local communities.”
A stalking horse bid is an initial bid on the assets of a bankrupt company. If other bidders emerge with higher offers, the bankruptcy court will decide which bid offers the most return for creditors.
EMS, Bob’s Stores, and their related entities declared bankruptcy in June.
All Bob’s Stores and some of the EMS stores were slated to liquidate and close, with the future of some EMS stores still to be determined. Parent company GoDigital detailed its expansion plans for the retail chains to The Daily in April 2023.
Under the stalking horse agreement, Mountain Warehouse was required to deposit $800,000 and is entitled to a $150,000 “break-up fee” if the sellers accept another bid. The purchase agreement includes EMS’s intellectual property, inventory, fixtures, fittings, customer lists, records, and two vehicles.
Founded in 1997, Mountain Warehouse operates more than 350 stores internationally and several stores in the Northeastern U.S.
Allegations Against GoDigital
EMS’s lender PNC Bank alleged in July that Jason Peterson, CEO of EMS parent company GoDigital, unlawfully “secreted” data licensing, intellectual property, and inventory from the debtors, and backdated the agreements to before they filed for bankruptcy.
That spurred adversary proceedings that could have created a cloud on title or prevented a buyer from making an offer for the remaining assets. At an Aug. 8 hearing, representatives of PNC Bank, the unsecured creditors, EMS, and GoDigital said they had come to an agreement where those assets would be returned to the debtor and the agreements would be null and void.
“While PNC remains extremely disturbed about what transpired here by Mr. Peterson, we do appreciate the hard work and professionalism of the Cole Schotz firm and Mr. Dean in helping us get to a resolution,” said Regina Kelbon of Blank Rome LLP, the law firm representing PNC Bank.
In a statement to The Daily, a GoDigital spokesperson denied the allegations.
“GoDigital and Jason Peterson personally invested millions to revive the Eastern Mountain Sports business as a brand for the ages. Sadly, it’s not surprising in today’s greedy world to see spurious, unfounded allegations from lawyers on the other side as they seek to bolster their case in a wrongful adversarial proceeding. The truth is on file in Peterson’s declaration in the case file. It is much simpler: we loved, cared for, and grew EMS, and made every arrangement to save it from bankruptcy, but simply could not wage the battle for Main Street against Wall Street alone. The future of EMS is only brighter for the investments we made in product, brand, customer acquisition, and business innovation.”
David Dean of Cole Schotz, who represented GoDigital and Jason Peterson, maintained at the hearing that his client had done nothing wrong, but it would have been too expensive to defend him, he said at the hearing.
“It was in our view done very, very above board and pursuant to the loan documents, but it was a million-dollar issue for us, and we were worried that we would spend more than that in defending us and potentially being the subject of much additional litigation after that, even if we won today. So we thought it was in the best interest of the parties, even though we don’t think we did anything wrong to settle this matter under the terms and conditions that we have agreed to.”
Kate Robertson can be reached at kate.robertson@emeraldx.com.
