May 20, 2015 / 7:29 PM / 3 years ago

U.S. judge rules RadioShack IP auction was fair

(Reuters) - A U.S. bankruptcy judge on Wednesday cleared the way for RadioShack Corp RSHCQ.PK to sell its brand name and customer data to a Standard General affiliate for about $26 million, rejecting a competing bidder’s claim that the auction process was unfair.

A RadioShack store is pictured in the Manhattan borough of New York January 15, 2015. REUTERS/Carlo Allegri

Separately, RadioShack resolved objections to the sale from several state attorneys general who were concerned the deal could threaten consumers’ privacy.

Those matters were the last major hurdles to the bankrupt electronics chain’s plan to sell its intellectual property to General Wireless, the same Standard General affiliate that acquired 1,743 RadioShack stores in March.

China-based Wonderland Investment Group, which competed in the intellectual property auction last week, said RadioShack pulled the plug on incremental bidding during the auction, abruptly telling parties they had 30 minutes to present final bids under seal.

Wonderland, which bid $17.3 million, said it could have beaten General Wireless’ $26.2 million offer if the initial guidelines had been followed. It later offered $30 million.

Judge Brendan Shannon, in bankruptcy court in Delaware, said on Wednesday that RadioShack had the right to alter bidding procedures in reliance on its business judgment.

A RadioShack lawyer said the two-day auction had grown tense, and the company felt bidders might walk away if incremental bidding dragged on.

Bankruptcy judges are hard-pressed to reopen auctions - even when they could yield higher bids - in part to discourage bidders from declining to participate and then advancing new bids after the fact, when an asset’s value is established.

Shannon said he did not think Wonderland was “trying to game the system” in this case, but still felt it was inappropriate to reopen bidding.

CONSUMER PRIVACY

Fort Worth, Texas-based RadioShack also resolved objections from several state attorneys general over the treatment of private customer data.

Sides held a nine-hour mediation last week in Dallas, with Standard General agreeing to limit its customer email access to the last two years, and to access only seven of 170 fields of data RadioShack kept on its customers, a lawyer for Texas Attorney General Ken Paxton said on Wednesday.

Standard General will receive names and addresses for 67 million customers, down from 117 million initially sought.

Competition from online rivals forced RadioShack into Chapter 11 in February. Unlike many bankrupt retailers, it intends to survive its stint in Chapter 11, with Standard General planning to keep the purchased stores in business by co-branding them with Sprint Corp (S.N).

Reporting by Nick Brown in New York; Editing by Chris Reese and Jonathan Oatis

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