In possibly the biggest business deal gone awry to date because of the coronavirus pandemic, Bed Bath & Beyond (NASDAQ:BBBY) is suing 1-800-Flowers.com (NASDAQ:FLWS) over the latter's purchase of Pmall.com. Bed Bath & Beyond claims 1-800-Flowers is trying to back out of the deal, while the internet florist says it's simply postponing the closing for a month.
Pmall.com, also called Personalization Mall, is a brand currently owned by Bed Bath & Beyond. It offers many products ready for personalizing, including clothing, drinkware, home décor, and kitchenware. The company adds customized names, short messages, or photo decals to these items.
Bed Bath & Beyond bought Pmall.com in 2016 for approximately $190 million in cash. CEO Steven Temares described the acquisition as an opportune entry into the "growing category of product personalization." This February, Bed Bath & Beyond agreed to sell Pmall.com to 1-800-Flowers for $252 million with a March 30 closing date.
On March 24, 1-800-Flowers informed the retailer it lacked the cash on hand to complete the acquisition because of the economic devastation wrought by COVID-19. Instead, it said it said it needed to postpone the closing to April 30.
While the acquisition contract features a MAE (material adverse effect) clause, this only allows 1-800-Flowers to exit the deal if Pmall.com itself, not the general economy, suffers a sharp downturn. Bed Bath & Beyond is launching a lawsuit to force 1-800-Flowers' compliance with the original terms. The lawsuit is taking place in Delaware, where judges have typically but not invariably taken the side of plaintiffs in similar cases.