Bombay sells Bailey Street assets to management

The Bombay Company turned its focus to retail and shed its wholesale side by selling most assets of its Bailey Street Trading subsidiary to Bailey Street Holding Company, a new corporation made up primarily of former Bombay management.

The newly formed Bailey Street Holding Co. agreed last week to pay Bombay $4.7 million in cash in return for $1.1 million in accounts receivable and $2.3 million in inventories. For the purchase, Bailey Street Holding Company teamed with Red River Ventures, a Dallas-based private equity firm.

The agreement gives Bailey Street Holding access to intellectual property, equipment and other facilities associated with the business.

Bombay expects to liquidate the remaining inventories not included in the sale through its 496 retail outlets and Internet channels. Fort Worth, Texas-based Bombay formed Bailey Street Trading in 2000 and hired Gregory Waylock in February 2001 to assist in the launch of the company, which has grown into a leading supplier of accent furniture.

"We are proud of what Bailey Street has accomplished under Bombay's guidance and are very happy to have the transaction completed," Bailey Street CEO Waylock said.

Larger product assortment is the main change Bailey Street's retail customers will notice, Waylock said. That will start quickly, with an introduction of more than 30 items and a re-launch of its accent furniture in Suite 455 at the World Market Center in Las Vegas. Its lines also will be shown in Atlanta, Dallas and High Point.

"We are investing in new product development, maintaining our relationships with our overseas sources and will continue to focus on providing outstanding value and service to our customers," Waylock said. "There won't be any impact in terms of how we work with them currently. We bought a substantial portion of the assets and we're continuing to ship. What they're going to see is more investment from our division in new product development and in our warehouse and technology so we can ship even quicker."

Bailey Street Holding also announced it has successfully negotiated a credit facility with The Trade Bank, a joint venture operation of Wells Fargo and HSBC.

"The combination of equity capital from Red River and our line of credit from The Trade Bank allows for sufficient access to capital to support our growth plans," Waylock said.

The majority of the staff will join the new company, which also retained Robert E.M. Nourse as its non-executive chairman and Alexandra Nourse as vice president of merchandising. Industry veterans may remember them as the husband-and-wife team that founded The Bombay Company of Canada and built it over 17 years into a publicly traded corporation with 450 stores in the United States and Canada.

"We are absolutely elated to have the two of them as part of our team," Waylock said. "They have been a major influence in helping us maintain our overseas relationships and designing our future assortment."

The addition of full-time design capability will allow more rapid product updates and private label design programs for national retailers.

"Our commitment to deliver outstanding value and service to our customers remains paramount," Waylock said. "Our employees have always put our customers first and that will continue in the future."

Bombay will take a one-time charge of $1.2 million to $1.4 million in connection with the deal, representing the cost of exiting a Bailey Street distribution center.

"We are pleased to have been able to complete this sale and the structure allows us to maximize the cash realized by exiting this business," Bombay Chairman and CEO James Carreker said. "Since the beginning of the fiscal year and through the ongoing liquidation of the remaining inventory, we expect to generate approximately $10 million. Exiting the business will allow Bombay to focus on its retail operations and will help provide the liquidity needed to continue the company's strategy to migrate from mall to off-mall locations and improve the strength of the overall balance sheet."