Losing a local coffee shop changes the makeup of a community.
Coffee shops aren’t just a place to eat and drink; they’re a place to gather with friends, a “third place” after home and work. Longtime Starbucks CEO Howard Schultz always advocated for this.
Fans of Compass Coffee, however, have seen their so-called third place disappear, as the chain has steadily closed locations after its January Chapter 11 bankruptcy filing.
That filing put the entire company at risk, with Compass filing for permission to immediately terminate 10 leases, although it did share hopes that suitors would be interested in those locations, according to documents on PacerMonitor.
Now, Compass Coffee, which has closed 10 locations with 17 still operating as part of its bankruptcy process, may have a lifeline that could save the cafes, if not the brand.
When Compass Coffee filed for Chapter 11 bankruptcy, London-based coffee chain Caffè Nero submitted a “stalking horse” bid of $2.9 million for the brand and its assets.
“The stalking horse bidder is the bidder who sets the floor for other bidders to bid against. By establishing a baseline bid, the stalking horse bidder protects the debtor from a situation where it might only receive unreasonably low bids for its assets,” the Troutman Pepper Locke law firm shared on its website.
Caffè Nero ultimately was the winning bidder, but had to raise its price to $4.75 million, Compass CEO Michael Haft told The Washington Post.
More Bankruptcy:
The higher sale price means there were other bidders. The bankruptcy court still needs to approve the sale.
“Over the course of three days, Haft said, the auction went through 24 rounds of bidding among the five groups looking to purchase Compass’s inventory, equipment, intellectual property, and other assets. One of the bidders — a private-equity firm — submitted a bid but was disqualified because it didn’t have the necessary capital to complete a deal,” the Post reported.
For the time being, assuming its bid gets approved, Caffè Nero plans to continue operating the remaining 17 locations under the Compass name. Haft told The Post it was unclear whether it would ultimately rebrand the cafes.
“A hearing to approve the sale is scheduled for Feb. 26 in the U.S. Bankruptcy Court for the District of Columbia. If the sale is approved and closes, Caffè Nero would become the new owner of substantially all Compass Coffee assets,” according to Daily Coffee News.
