(Bloomberg) — RadioShack Corp. is preparing to shut down the almost-century-old retail chain in a bankruptcy deal that would sell about half its store leases to Sprint Corp. and close the rest, according to people with knowledge of the discussions.
The locations sold to Sprint would operate under the wireless carrier’s name, meaning RadioShack would cease to exist as a stand-alone retailer, said the people, who asked not to be identified because the talks aren’t public.
The negotiations could still break down without a deal being reached, or the terms could change. Sprint and RadioShack also have discussed co-branding the stores, two of the people said. It’s also possible that another bidder could emerge that would buy RadioShack and keep it operating, the people said. The Chinese backers who took the Brookstone chain out of bankruptcy, Sanpower Group, also have been in discussions about bidding for RadioShack assets, one person familiar with the talks said.
The discussions represent the endgame for a chain that traces its roots to 1921, when it began as a mail-order retailer for amateur ham-radio operators and maritime communications officers. It expanded into a wider range of electronics over the decades, and by the 1980s was seen as a destination for personal computers, gadgets and components that were hard to find elsewhere. In more recent years, though, competition from Wal-Mart Stores Inc. and an army of e-commerce sellers hurt customer traffic.
In a sign of RadioShack’s escalating woes, the New York Stock Exchange said Monday it would suspend trading of the stock immediately. The exchange took the step after RadioShack failed to submit a business plan that would address its lack of compliance with NYSE rules. Companies listed on the exchange are required to have an average market value of at least $50 million for 30 straight days or shareholder equity of that amount.
RadioShack received a rescue financing package from Standard General LP in October, and the hedge fund would serve as the lead bidder in a filing and provide debtor-in-possession financing after filing, said the people familiar with the matter. The investment firm arranged $535 million of first-lien loans in October and is the biggest shareholder of the retailer. Liquidating the stores also would let RadioShack avoid a battle with lenders over control of the company.
RadioShack currently has more than 4,000 company-operated U.S. stores. Sprint is discussing the acquisition of 1,300 to 2,000 locations, the people said. In one possible scenario, RadioShack considered keeping the name alive as a store-within-a-store concept involving wireless carriers, two of the people said.
Merianne Roth, a spokeswoman for Fort Worth, Texas-based RadioShack, declined to comment, as did representatives for Standard General and Brookstone. Sanpower didn’t immediately respond to a request for comment outside of business hours in China.
The shares tumbled 13 percent to 24 cents on Monday in New York. RadioShack has lost about 90 percent of its value over the past year.
RadioShack CEO Joe Magnacca has been remodeling stores and revamping the retailer’s product lineup in a bid to revive sales. Still, the former Walgreen Co. executive hasn’t halted a decline at the electronics chain, which has posted 11 straight unprofitable quarters.
Sprint, meanwhile, is expanding its chain. CEO Marcelo Claure told investors at a conference last month that the company would be adding retail locations.
“This is a year in which we intend to grow our distribution dramatically,” Claure said. “You are going to see the opening of more and more Sprint stores as this is one area that we work on.”
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