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STATE COLLEGE, Pa. -- Less than a year after retaining a financial agency to help reorganize for the future, Uni-Marts Inc., the beleaguered Pennsylvania convenience store chain, today signed a letter of intent to sell itself to a private company controlled by two of its top officers.
HFL Corp., a Pennsylvania real estate investment and development company, will pay $2.25 in cash for each of the Uni-Marts shares it does not already own. HFL is controlled by Henry Sahakian, the chairman and CEO of Uni-Marts, a regional convenience store operator, and by his brother Daniel, who is a Uni-Marts director. The deal is subject to various conditions, including that its board receive an opinion from a financial adviser that the purchase price is fair to its shareholders. Also, the company's lenders must consent and investors must approve the deal, Henry Sahakian said.
Uni-Marts said a special board committee was negotiating the transaction and that it engaged Boenning & Scattergood Inc., an investment banking firm, to deliver the fairness opinion. HFL's proposal looks to be favorable. Its offer of $2.25 per share represents a 21 percent premium over the $1.86 closing price of Uni-Marts' stock Monday. Although they are well below their 52-week high of $3, the shares have rallied recently from their low of 85 cents. Based on 7.2 million outstanding shares of Uni-Marts' stock, HFL's offer values the company at more than $16 million.
Last September, Uni-Marts hired Trefethen & Co. LLC to assist with its ongoing divestiture of certain underperforming stores non-operating assets.
"While management of the company will continue to pursue its previously-announced divestiture plan, the execution of such plan will require an extended period of time," Sahakian said. "Management is anxious to create liquidity for the Uni-Marts shareholders as soon as possible. We are therefore gratified to be able to offer the Uni-Marts shareholders a cash price for their shares representing a significant premium to the recent market price of the shares."
State College-based Uni-Marts, which operates 294 convenience stores and Choice Cigarette Discount Outlets in five states, said the letter of intent is not bound by due diligence or financing contingencies. It said the letter expires June 27 if a definitive agreement has not been reached.
For its part, HFL Corp. declined to elaborate on its plans for the chain, though its doubtful it would look to rebrand any of the convenience stores. HFL, also based in State College, has given Uni-Marts a deposit of $250,000 that is refundable if the closing conditions cannot be met. Also, Uni-Marts said the letter requires it to pay HFL's out-of-pocket expenses up to $100,000 if terminates the agreement for any reason other than an unfavorable opinion from Boenning & Scattergood or the June deadline is not met.
But if under certain circumstances the sale does not go through and Uni-Marts agrees to sell to a different party within six months, Uni-Marts said it must pay HFL a $1.5 million fee.
Stephen Krumholz, chairman of Uni-Marts' special committee, said members have spent "a great deal of time in the pursuit of a strategic alternative which will provide the greatest benefit to Uni-Marts, its shareholders and employees."
Uni-Marts has traveled a rough road over the past two years. For the first quarter of 2003, the chain reported a net loss for the quarter of $422,000. For 2002, Uni-Marts lost $1.3 million compared with net earnings of $451,000 in 2001. Revenue for 2002 fell 3 percent to $409.5 million from $422.3 million, the company said.