Dive Brief:

• Mexican-based retailer Gonher will acquire “substantially all” of Sam Ash Music’s assets out of bankruptcy for $15.2 million, according to court documents. Gonher was declared the successful bidder following a June 20 auction. New Jersey-based U.S. bankruptcy court judge Stacey Meisel approved the deal on Friday.
• Sam Ash filed for Chapter 11 in May after 100 years in business. The company previously said it plans to close all of its retail stores. At the time it filed, the company said it had 42 stores in 16 states. The retailer listed 36 stores in 14 states on its website on Wednesday.
• According to court documents, Gonher will acquire Sam Ash’s merchandise — excluding its store closing sale assets — along with its assumed leases, intellectual property elements, trademarks, internet domain names, social media accounts, marketing materials and customer data.

Dive Insight:

In court documents, Sam Ash cited an over reliance on in-store retail traffic, too many locations, the elimination of store visits during the height of the pandemic and declining revenue as contributing factors to the company’s unsustainable financial situation. Sam Ash said in May its liabilities and assets ranged between $100 million and $500 million. 

Due to insufficient liquidity, Sam Ash acknowledged it didn’t pay rent for most of its store locations in April or May and it also withheld most vendor payments. Its vendors, in turn, withheld deliveries or required tighter terms, which limited the flow of inventory to stores and e-commerce customers, exacerbating the company’s financial and operational issues, Sam Ash previously said.

Sam Ash and Gonher did not immediately respond to Retail Dive’s request to comment on the deal.

Clayton Durant, founder of the music consulting firm CAD Management and an adjunct professor at Long Island University’s Roc Nation School of Music, Sports, and Entertainment, told Retail Dive Wednesday in emailed comments that several aspects of the acquisition deal stand out.

First, Sam Ash’s intellectual property property “is too valuable for a buyer to overlook.” Secondly, the opportunity for some Sam Ash employees to transfer to working for Gonher “reflects what has made Sam Ash a renowned brand for over 100 years: its deep care for its people.” 

Durant said that move is “commendable, especially considering that the leadership team is likely under pressure to maximize shareholder value rather than prioritizing stakeholders like the employees who have helped build the company's brand over the years.”

If Gonher were to also acquire Sam Ash's e-commerce business, Durant said Gonher would gain an competitive advantage against Sweetwater, which is a major player in the U.S. music retail space. Sweetwater is primarily an e-commerce business, although it does operate a retail store at its Indiana headquarters. Another rival, Guitar Center, has about 300 stores nationwide.

“If Gonher successfully acquires Sam Ash’s intellectual property and e-commerce assets, I foresee a completely revamped online strategy for Sam Ash, supported by Gonher Music Center, leading to a revival in 3-4 years that puts them toe to toe with Sweetwater if the online experience is managed right,” Durant said.

Established in New York City in 1924 by Sam Ashkynase and his wife Rose Dinin, the musical instrument and accessories retailer was family owned and operated for a century.