Dahl's Foods Inc., a Des Moines institution for 84 years, was auctioned off piece by piece to the highest bidder Friday morning inside a downtown bankruptcy courtroom.
It's the end of an era for a once-formidable competitor in the Des Moines grocery market.
Associated Wholesale Grocers Inc. of Kansas purchased seven of the company's 10 remaining stores for $2.45 million. Those locations will continue to operate as grocery stores, only under a different name.
Details on the new name likely will be announced in the next few months, AWG officials said.
The company's other three locations will be closed.
Dahl's filed for bankruptcy Nov. 9. The company reported $41 million in debts and about $45 million in assets.
AWG, the company's grocery supplier and its largest creditor, purchased seven Dahl's buildings in 2011 and leased them back to the company. On Friday it purchased the nongrocery assets from those stores.
The retailer-owned grocery cooperative lent Dahl's $6.6 million to continue operating during the bankruptcy. It also will pay an undetermined amount for the store's inventory.
PREVIOUS COVERAGE: | Dahl's Foods timeline is a history of firsts
The seven stores will be remodeled and rebranded over the next 18 months, Jerry Garland, AWG's chief executive, said in a statement.
But breathing life back into the business won't be easy, according to David Livingston, a grocery store analyst from Waukesha, Wis.
"Dahl's has pushed people away during this, and customers have gotten used to shopping someplace else," he said. "It's tough to bring a new name into a new market. And they will be coming into Hy-Vee's house."
Craig Moore, Dahl's chief executive, is more optimistic.
"We are in a competitive market, and sales have been a challenge, but with the uncertainty behind us we will be working diligently to gain back our business and fully develop our long-term plans," he said.
Kum & Go Inc. purchased the 5003 E.P. True Parkway location in West Des Moines for $3.5 million. It plans to build a convenience store on the site to replace an older, smaller convenience store across the street, said Siobhan Harman, real estate development manager for the West Des Moines-based convenience store chain.
The company had been looking for a development opportunity for several years in that area, she said. "We want to build a larger store with a broader selection of fresh food and more fuel options."
Timelines for demolishing the Dahl's store and building a Kum & Go have not been set.
The Dahl's location at 8700 Hickman Road in Clive was sold for $2.8 million to Equity Ventures Commercial Development, which will close the store and redevelop the property into retail and/or commercial space.
The remaining store at 3400 E. 33rd St. was not sold. It will be closed by the middle of March. A company hired to liquidate the store's assets is expected to begin that process Monday.
Dahl's estimated 700 employees will be able to reapply for jobs at the remaining stores, Mark Benedict, an attorney representing AWG, told the bankruptcy judge.
The 12-week bankruptcy was expedited to minimize losing more sales and employees. The company had about 900 employees when it filed for bankruptcy in November and has continued to lose workers.
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"People are concerned and anxious about the future (of the company)," Moore said. "A lot of people have left."
Things had to move quickly because the company had perishable products, said David Schoeder, a principal with The Food Partners, a Bethesda, Md.-based food broker hired to help find Dahl's buyers.
"Since the bankruptcy, sales have been a challenge, and retention of good employees has been a challenge," he said in court Friday. "There were urgent reasons to expedite (the bankruptcy). I have yet to see one get better in bankruptcy as time goes on."
Even with the quick resolution, creditors will likely all get paid.
Thomas Fawkes, the attorney representing the unsecured creditors in the bankruptcy, said he was initially concerned the bankruptcy was moving too quickly. "Now that it's come to an end, I can state that all questions have been answered," he said.
The unsecured creditors, which are owed almost $1.6 million, will likely be paid because of the success of the auction, he said.
Competitive bidding for the pharmacy assets resulted in a premium price. Hy-Vee, Walgreens and CVS all participated in the auction, attorneys said.
Hy-Vee Inc. will purchase pharmacy-related assets of the 8700 Hickman Road, E.P. True Parkway and East 33rd Street stores for $515,000, plus the value of the pharmacy inventory, according to attorneys. Pharmacy customers will be notified before their prescriptions are moved to Hy-Vee.
One of the biggest losers in the bankruptcy will be employees and retirees who were owed payments from the company's employee stock ownership plan. AWG will not be responsible for the ESOP, said Jeffrey Goetz, Dahl's attorney.
Open for business
The following Dahl's Foods Inc. stores will be remodeled and rebranded, but continue to operate as grocery stores:
- 1819 Beaver Ave., Des Moines
- 3425 Ingersoll Ave., Des Moines
- 4121 Fleur Drive, Des Moines
- 1320 E. Euclid Ave., Des Moines
- 4343 Merle Hay Road, Des Moines
- 5440 N.W. 86th St., Johnston
- 15500 W. Hickman Road, Clive
Dahl's timeline
1931: Wolverine Thilbert "W.T." Dahl opens his first store at 623 E. 12th St. in Des Moines for $600. The store was 1,000 square feet.
1937-39: Dahl, who formed a partnership with his first wife's brother, Frank DePuydt, opens a store at 4801 Grand Ave., and two years later they open another at 2716-2718 Kingman Blvd.
1948: The first supermarket opens on Beaver and Franklin avenues. It is said to include the first supermarket bakery between the Mississippi River and the Rocky Mountains.
1950: Dahl and DePuydt want to buy each other out. Dahl is divorcing his wife, Genevieve. The partners each submit sealed bids with the stores going to the highest bidder. Dahl outbids DePuydt's $221,000 offer by $30,000.
1952: Dahl opens the largest supermarket in the Midwest, a 21,000-square-foot store at Ingersoll Avenue and 35th Street. It is one of the first stores to have a pharmacy and a bakery.
1965: The Dahl house, a 5,337-square-foot manor with an indoor swimming pool, is completed at 1 S.W. 56th St.
1970: Dahl sells all of his stores to an employee group and begins serving as a consultant.
1975: The Employee Stock Ownership Plan (ESOP) is formed.
1979: Dahl's Foods expands to Missouri, an ill-fated move that ended in 1997 with W.T. Dahl saying it allowed rival Hy-Vee Food Stores to cherry-pick better locations in Des Moines.
1981: The first debit card transaction to buy groceries in the U.S. occurred at the Dahl's on Fleur Drive.
2000: Dahl's opens a store at 5440 86th St. in Johnston.
2002: Dahl's closes a store at 6200 S.E. 14th St. in Des Moines.
2006: W.T. Dahl dies at age 97.
March 2014: Craig Moore is named chief executive, replacing David Sinnwell.
May 9, 2014: Dahl's announces the closing of the Ankeny and Ames stores.
Aug. 29, 2014: Dahl's announces the closing of the Prospect Avenue store in West Des Moines.
Nov. 9, 2014: Dahl's files for Chapter 11 bankruptcy.
Jan. 30, 2015: Bankruptcy judge approves the sale of Dahl's 10 stores and assets. The sale is to be completed by the end of March.
