After two days of vigorous bidding a federal bankruptcy judge has approved the sale of Tower Records to the liquidator Great America Group for a price of $134.3 million. Tower's attorney Peter Gurfein told the AP that the total price of the deal will be close to $150 million (including leases and properties) and that going out of business sales will start on Saturday.
In late August Tower Records, which operated 89 stores in 20 states and employed over 3,000 people, filed for bankruptcy for a second time (the first was in 2004) with debts to suppliers of around $200 million (see 'Bankrupt Tower to Trans World?').
Coming on the heels of the Musicland bankruptcy earlier this year (see 'Transworld Bid for Musicland Approved'), the demise of Tower Records demonstrates the continuing weakness of the music store channel in the face of illegal downloading and competition from big box discounters. There will undoubtedly also be some collateral damage to publishers of graphic novels, manga, and anime (see 'Tower Records Expanding Books'), though not as much as was the case with Musicland because of the Tower chain's smaller size and the likelihood that suppliers will be able to recoup a higher percentage of Tower debt.
ICv2 did manage to contact representatives from several leading American anime companies and they responded that while they were sorry to see the demise of the Tower chain, the effect on their businesses would be negligible when compared with that of Musicland.
Trans World, which took over the Musicland chain and currently operates over 1,100 mostly mall stores, made a concerted effort to acquire Tower Records but its bid fell short by $500,000. While Trans World was planning to close at least two dozen Tower stores if it won the bidding, it did plan to keep the majority of the Tower outlets open, and a spokesman for Trans World 'questioned whether $500,000 was a material enough difference to liquidate a company, as opposed to keeping thousands of people employed.'
Tower's secured trade credit holders, through their attorney, also urged the judge to accept the Trans World bid stating 'sometimes the highest bid is not the best bid,' but unfortunately for those employed at Tower, the judge decided otherwise.
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