Court OKs sale of Wolf to Ritz Camera

Greenbelt to be base of 1,300-store chain

September 22, 2001|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

A bankruptcy judge has approved Beltsville-based Ritz Camera Center's $84.7 million purchase of rival Wolf Camera Inc., throwing out proposals from three other companies that had threatened the deal.

Executives from Ritz and Wolf said they expect to complete the transaction by Oct. 1, creating a national chain with 1,300 stores in 48 states.

Some analysts said yesterday that the merger is good for both companies. Ritz has a history of successfully acquiring competitors such as the financially strapped Wolf, which filed for Chapter 11 bankruptcy reorganization in June. Ritz acquired Kits Camera Inc. of Seattle in 1997, Inkley's Camera of Salt Lake City in 1996 and the Camera Shop of Philadelphia in 1999.

"They have the expertise to do it," said Mark Millman, president of Millman Search Group Inc., a national retail consulting and executive search business in Lutherville. "They have the management experience to take this over, convert it and make it a success. They're the leader in the field."

Without a merger, the odds of Wolf surviving bankruptcy were slim, said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York retail investment banking firm.

"Less than 1 percent of companies that go bankrupt are around five years later," Davidowitz said. "They rarely survive as a single entity. The Wolf bid, I felt, was totally sane. Instead of trying to fly on their own, which never works, they're merging into a larger player."

The two companies announced the deal last month. Wolf filed for bankruptcy protection after it began having financial difficulties stemming from a 1998 purchase of 450 CPI/Fox Photo stores.

"We certainly knew when we made the arrangement with Wolf Camera that it was still subject to the discretion of the bankruptcy judge," said David Ritz, chief executive officer and chairman of Ritz Camera. "But we're pleased with the decision. I think our offer was the best offer for the company."

Wolf, based in Alpharetta, Ga., had several last-minute suitors. Cardinal Investment Co. of Dallas, Jessops Camera of the United Kingdom and a partnership between GB Equity Partners and Palladin Capital Group in Boston all submitted proposals to buy or restructure Wolf.

Judge C. Ray Mullins of U.S. Bankruptcy Court in Atlanta considered the Jessop plan before ruling late Thursday to approve the deal between Ritz and Wolf. Mullins did not return calls yesterday.

Jessop's plan was backed by Eastman Kodak Co., Wolf's largest creditor, and the creditors committee. It offered a $50 million line of credit to help Wolf reorganize and $30 million to pay off lenders. Kodak backed the plan with $8 million.

"We had supported a plan that would have allowed us to recoup some of the debt we had occurred," said Paul Allen, a spokesman for Kodak. "But we respect the judge's decision."

Allen said Kodak hasn't decided whether to appeal the decision.

Wolf officials were in favor of the deal with Ritz, which they said was further along than any other proposal and supported by Wolf's bank lending group. The lending group has first claims on proceeds from any asset sales.

"I think we're certainly pleased that the court ruled in favor of approving this sale," said Stephen LaMastra, Wolf vice president for corporate strategy.

Once the buyout is completed, the corporate headquarters will be in Beltsville, and Chuck Wolf, founder and chief executive officer of Wolf, will become vice chairman of the combined company.

Wolf and David Ritz are cousins. Wolf's 4,000 store employees won't be affected by the deal, but some corporate workers will receive severance.

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