Toys “R” Us – Court Approves Taj Debtors’ Motion Covering Asia JV Sale Procedures

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September 14, 2018 – The Court hearing the Toys “R” Us case approved the Taj Debtors’ sale motion [Docket No. 4671] which establishes (i) bidding procedures for the sale of the Debtors’ indirect 84.87% interest in Toys (Labuan) Holding and the related intellectual property (collectively, the “Asia JV” or “assets”), (ii) a timetable for an auction and related hearings and (iii) the applicability of a right of first refusal and a “drag” right. As previously reported [Docket No.4016], “The Court recently approved the Debtors’ plan to sell their most valuable remaining asset, a majority interest in Toys (Labuan) Holding Limited, often referred to as the “Asia JV”. It is based in Hong Kong and comprises the Debtors’ business across Japan, China and Southeast Asia. The Debtors own 84.87% of the Asia JV. The remaining 15.13% is owned by Fung, a China-based retailing arm of the overall Fung Group….The Bidding Procedures proposed in this motion will facilitate a sale process designed to obtain the highest and best price for the Assets….This Motion asks the Court to make two additional findings as part of the Bidding Procedures: one, that a right-of-first-refusal provision in the Shareholders’ Agreement is invalid and unenforceable for these purposes because it restricts assignment of the Debtors’ indirect interest in the Asia JV, hindering the bidding process and contributing to a decline in bid prices; and, two, that the ‘drag’ right in the Shareholders’ Agreement permitting the majority holder to sell the minority interest on the same terms and conditions is enforceable according to its terms. These additional findings, well within the Court’s authority to make in these circumstances, are needed to ensure an auction free from artificial constraints on the Debtors’ efforts to obtain the greatest possible value for their stakeholders….The Stalking Horse Purchase Agreement contemplates the sale of the Taj Debtors’ indirect equity interest in the Asia JV to the Stalking Horse Bidder for $760 million.” The order proposes the following general timeline: (i) an October 1, 2018 deadline to submit qualified competing bids, (ii) an auction date, if necessary, of October 5, 2018 and (iii) an October 10, 2018 sale hearing.

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