Radio Shack Enters Bankruptcy and Morphs Into Sprint

RadioShack, the US-based electronic retail chain, has entered Chapter 11 bankruptcy protection. The company sells everything electric from batteries and electronic toys to mobile phones and TVs, as well as electronic components for hobbyists who will now have to resort to using internet suppliers for such components.

On a greater scale, RadioShack was an institution which started in 1921 and operated in parts of Europe, Australia, South America and Africa. In recent years, its fortunes turned and RadioShack closed stores at an increasing rate. Now the company has announced that is has entered into an agreement with Standard General, a New York-based investment firm to take over some of its retail locations. (Standard General is a company which focuses on companies with complex capital structures that are undergoing dramatic change or are faced with material events.)

The deal seems rather complicated, as it is not a straight forward sale or takeover. The basic approach is that Standard General facilitates the sale by taking over the retail space becoming the landlord. Out of the existing 4,100 company owned stores, General Wireless (subsidiary of Standard General) will acquire between 1,500 and 2,400 stores, while the rest of the stores will be liquidated.

Up to 1,750 of the stores taken over by Standard General will be partially sub-leased to Sprint as retail space. This will create a store in store position for Sprint, even though the storefronts will run under the Sprint name. However, the rest of the retail space will sell other merchandise..

Not included in the Chapter 11 filing are the company’s franchise stores as well as operations in Mexico and Asia. From the sound of the press release, it seems that RadioShack is aiming at becoming a retail company without its own retail stores. – Norbert Hildebrand