Aug. 21--Market Basket soon will reach a "critical point" of potentially having to close stores if a deal to sell the company is not reached soon while a Friday deadline for a resolution looms, Gov. Deval Patrick said Wednesday.
Patrick told reporters in Greenfield that he suggested the shareholders, including ousted CEO Arthur T. Demoulas and his rival and cousin Arthur S. Demoulas, set an internal deadline to hasten a resolution to a crisis that has left the $4.6 billion family-owned supermarket chain mostly without customers, without a majority of its employees, without fresh groceries and bleeding tens of millions of dollars.
He and New Hampshire Gov. Maggie Hassan met for about five hours on Sunday in Springfield with both Arthurs Demoulas, their representatives, Keith O. Cowan, chairman of the company board of directors and a representative of the company shareholders aligned with Arthur S.
Patrick said the company, given information officials have relayed to him, is getting close to having to shutter stores. "In many respects they seem from accounts they have given us quite close to that critical point," he said. "Nobody wants to have the business remain on its knees this way."
A major fish vendor, Boston Sword & Tuna, publicly cut ties with the company Monday after weeks of problems receiving payments, at first not receiving them and then receiving the wrong amounts. Other vendors have similar complaints, including local companies in Lawrence and Lowell who declined to speak on the record.
Patrick said the company has been able to pay its employees for hours worked. But store managers earlier this month eliminated hours for thousands of part-time employees, citing plummeting sales, and the co-chief executives had to intervene to prevent many full-time workers from being laid off as well.
The governor said he suggested a Friday deadline to focus and motivate the discussions. "One thing I asked them to consider is an internal deadline really because there are a number of issues that can be debated endlessly," he said.
His staff has been in contact with company officials, though he said he expected to talk to both Arthurs later Wednesday.
Patrick also said there is no place for state financing or tax credits to facilitate a deal. "They don't need that," he said flatly. "There's more than enough money to get this deal done. The price is not the issue."
Mark S. DiSalvo, chief executive of Semaphore, a professional services firm that takes over management of troubled venture capital and private equity funds, said Arthur T., who has offered to buy the 50.5 percent of Market Basket Arthur S. and his family owns, may not be able to get financing for the full pre-protest value of that half the company.
Arthur T. has said he offered to buy those shares at pre-crisis value. But the success of Arthur T.'s supporters in grinding the business to a halt had the effect of reducing its current market value. A lender would only lend according to its current reduced value, DiSalvo said, meaning Arthur T. likely has a substantial gap in funding to plug.
Arthur S.'s side has offered financing, but the two factions remain at odds over the terms. Meanwhile, Arthur T. has offered to resume his role as CEO while a deal is struck, an offer Arthur S.'s side so far has rejected.
"There's something Arthur T. needs to bend on, and that is he's going to have to accept substantially the loan terms that are on the table," DiSalvo said.
"Issue two is where Arthur S. needs to bend, and that's the level of authority Arthur T. needs in order to return prior to a deal being closed," he added.
Market Basket has been valued at between $3 billion and $3.5 billion before the boycott and protests. Arthur T.'s offer is roughly $1.6 billion.
The Arthur S. shareholders, in a move endorsed by the board of directors, pulled $300 million in dividends from the company last year, a move DiSalvo said likely will haunt the company as it struggles through this boycott and may have to borrow money to pay operating expenses.
"Here's a consequence of it: They're a company that would have been able to withstand what has happened if that $300 million were available," he said. "The insult to injury is they're going to have to go pay commercial rate to not do business, to just enjoy the prospect of being an operable business once again one day."
The board of directors, controlled by Arthur S.'s side of the family, fired Arthur T. on June 23, igniting a smoldering corporate mutiny that burst into a companywide rebellion on July 18. Customers and thousands of employees have protested and urged a boycott of the stores while warehouse workers and drivers walked off the job, crippling the company's complex supply chain and delivery system.
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