RULINGS DUE ON FLEMING DIVESTITURES

DALLAS -- The U.S. Bankruptcy Court here will decide this week on the buyers for 31 Fleming-owned Rainbow Foods locations in Minneapolis and nine Food 4 Less units in Northern California, according to documents obtained by SN through Bankruptcy Creditors' Service, Trenton, N.J.Although Fleming has signed asset purchase agreements with Roundy's, Pewaukee, Wis., for the Rainbow stores and with Save

DALLAS -- The U.S. Bankruptcy Court here will decide this week on the buyers for 31 Fleming-owned Rainbow Foods locations in Minneapolis and nine Food 4 Less units in Northern California, according to documents obtained by SN through Bankruptcy Creditors' Service, Trenton, N.J.

Although Fleming has signed asset purchase agreements with Roundy's, Pewaukee, Wis., for the Rainbow stores and with Save Mart Supermarkets, Modesto, Calif., for six of the nine Food 4 Less units, both store groups have been opened up to additional bidding.

There were reports that Miner's, a Hermantown, Minn.-based operator of 20 stores in the Duluth area, made a bid for the 31 Rainbows. Miner's executives did not return SN phone calls last week.

Miner's, which operates most of its stores under the Super One Foods banner, reportedly offered to buy all 43 Rainbow stores in Minnesota and Wisconsin late last year -- a bid that was rejected by Morgan Stanley, Fleming's New York-based investment banker, according to the Minneapolis Star Tribune.

Roundy's has already agreed to pay $85 million for the 31 Rainbow stores and to assume $35 million in capital lease obligations. Under the auction requirements, any other bid would have to be at least $9.5 million more than $85 million, the court documents pointed out.

Although Save Mart declined to indicate what it paid for the six Food 4 Less stores, SN estimated the price to be approximately $21.5 million, based on the price for all nine stores contained in the court documents. Under the auction rules, competing bids would have to be at least $1.2 million more, according to the documents.

If either Roundy's or Save Mart is unsuccessful in the auction process, each would be entitled to a breakup fee based on a percentage of its bid -- $3 million for Roundy's and an estimated $644,000 for Save Mart -- according to court documents and SN estimates. The willingness of each company to commit to a sales transaction "and to serve as a 'stalking horse' against which other prospective purchasers will be compared ... represents a significant contribution ... to the estate."

Fleming said in the documents that while the bids by both companies "may be fair and reasonable, the debtors also believe it would be more advantageous to conduct a public auction to identify the highest and best offer for the assets."

Fleming has been operating under Chapter 11 bankruptcy protection since April 1. In other developments in the bankruptcy proceedings:

Fleming said it has closed its 17 Texas-based units of Yes!Less, a banner that combined a limited-assortment format with a dollar store. It also said it is conducting liquidation sales at nine Rainbow Foods stores in Texas and a single Food 4 Less in Arizona, with closings scheduled for later this month.

Fleming and 43 Sentry franchisees in Wisconsin resolved a dispute, with Fleming agreeing to pay back all pass-through funds -- money earmarked for payments to vendors -- that it had removed from the franchisees' bank accounts just prior to filing for Chapter 11 and the retailers agreeing to pay all pre-petition amounts owed to Fleming.

Fleming said it would reject leases on more than 100 real-estate properties and four Cessna aircraft.

Fresh Brands, Sheboygan, Wis., said last week it has agreed to purchase a single Rainbow Foods store in Racine, Wis. That sale is expected to close July 7. Fresh Brands said it will convert the store to the Piggly Wiggly banner.

An auction is scheduled for tomorrow to sell assets from Fleming's Product Supply Center in Minneapolis that formerly supplied the 31 Rainbow Foods stores in the area. All bids were due last week.

The auction for the nine Food 4 Less stores was scheduled for last Friday in New York, with interested parties able to bid separately on the six stores Save Mart has been approved to buy and on the other three; the auction for the Rainbow stores is scheduled for tomorrow at the Wilmington, Del., offices of Fleming's attorneys.

A court hearing is scheduled for Wednesday to confirm the results of both auctions and to approve the terms of the sale.

The six Food 4 Less stores approved for sale to Save Mart earlier this month were in addition to 19 Food 4 Less stores Save Mart acquired prior to Fleming's Chapter 11 filing.