Failed retailer HHGregg Inc., which racked up more than $2 billion in annual revenue prior to landing in bankruptcy this March, has sold its name and other intellectual property rights for a mere $400,000.
Court records show that at an auction late last month, an entity called Valor LLC scooped up the rights to the Indianapolis-based company’s trademarks, domain names, customer files and other data.
Buyers of a defunct retailers' intellectual property sometimes do so with the intention of resurrecting the brand, either as an online-only business or with brick-and-mortar locations. It's not clear what Valor's intentions are. Company principal Michael Eisner did not respond to phone calls or an email.
HHGregg’s intellectual property became available after the electronics and appliance retailer failed to find a buyer and closed all 220 its stores this spring.
In buying HHGregg’s intellectual property, Valor outbid Sears Holdings Corp., the suburban-Chicago based owner of national retailers Sears and Kmart, which offered $350,000. A court filing doesn't indicate whether there were additional bidders.
Valor appears to be based in Brooklyn, New York, though details about the company are scarce. Eisner is linked to another company called Circuit Street LLC in Brooklyn, which offers “the latest technology in drones and digital cameras,” according to the business’ voicemail recording.
An online business description characterizes Circuit Street as a company with seven employees and annual revenue of $380,000.
Richard Feinberg, a professor of consumer science and retailing at Purdue University, said a company’s intellectual property can be quite valuable.
Customer lists, for instance, are impossible to duplicate and could be sold to other companies for a tidy profit. Or the brand name itself could give the buyer instant name recognition, which it could use to relaunch the chain on a smaller scale.
“They don’t have to open 100 stores but could open 10 of the best locations, which are probably still empty and would do very well,” he said.
HHGregg hired Boston-based Hilco Streambank to market the intellectual property and assist in its sale.
According to testimony from David Peress, a Hilco executive vice president, interest in buying HHGregg's intellectual property appeared to be limited.
“There is no evidence to suggest that further marketing of the intellectual property would generate additional value for the debtors’ estates in excess of the winning bid, and further delay in the sale of the intellectual property could lead to further diminution in its value,” Judge Robyn L. Moberly wrote in an order approving the sale..
Hilco’s fee structure suggests the consultancy thought the HHGregg name would fetch more money.
The agreement said Hilco Streambank’s fee would be 5 percent if the purchase price was less than $5 million, 7.5 percent if it was $5 million to $10 million, and 10 percent if it was more than $10 million.
If the winning bid were from an affiliate of the Throgmartin family, which launched the company in 1955, the fee would be cut in half. The lower fee perhaps stemmed from the fact the family was in the loop without the benefit of Hilco Streambank’s marketing efforts.
That language had fueled speculation that the Throgmartin family would bid and attempt to revive HHGregg.
Sources told IBJ this spring that before the chain folded, Gregg Throgmartin, who was an HHGregg executive vice president before leaving the company in 2014, had discussed buying a swath of stores in the chain's strongest markets. Throgmartin, now an executive with TechStyle Fashion Group in Los Angeles, has not returned repeated calls from IBJ.