April 16 (Bloomberg) -- Polaroid Corp., the bankrupt pioneer of instant photography, drew a top bid of $88.1 million from the private-equity firm Patriarch Partners LLC in a court auction, a person close to the proceedings said.

Patriarch, the owner of about 50 companies, made the best offer today in bidding supervised by U.S. Bankruptcy Judge Gregory Kishel in St. Paul, Minnesota, the person said. Two earlier winning bids, including one by Patriarch, failed to win court approval. Kishel will consider the latest results at a hearing today.

The auction, which includes Polaroid’s global trademark rights and its headquarters in Minnetonka, Minnesota, stretched from one day to more that two weeks. Kishel reopened the bidding twice after complaints about the fairness of the process from creditors and interested buyers.

Patriarch, the New York-based equity stakeholder in the Arizona Iced Tea brand and mapmaker Rand McNally, won the first auction March 31 with a $59.1 million offer. A joint venture of two liquidation firms, Hilco Consumer Capital LP of Toronto and Gordon Brothers Brands LLC of Boston, succeeded in reopening bidding and won the second auction on April 8 with a $72.6 million offer.

The court rejected both winning offers for the 72-year-old company after the losing bidders argued the auction process was unclear about bid limits, including the amount of equity that could be offered.

Karine Joret, a spokeswoman for Hilco and Gordon Brothers, declined to comment.

Patriarch Bid

Patriarch’s bid today includes $63.5 million in cash and a 25 percent stake in the new company valued at $16.3 million, the person close to the proceedings said. The price also includes $8.3 million of Polaroid assets that Patriarch isn’t buying, and payment of a $1.7 million breakup fee for Polaroid’s so-called stalking-horse bidder, the person said.

Luxembourg-based Genii Capital SA in January agreed to buy Polaroid for $42 million before its offer was beaten in the first round of bidding, triggering the breakup fee.

The combined bid from Hilco and Gordon was $87.6 million, including $55 million in cash and a 25 percent stake in the new company, also valued at $16.3 million, the person said. The venture’s offer excluded $16.4 million of assets and the breakup fee, the person said.

Creditors Object

Polaroid’s biggest creditors, including hedge-fund firm Ritchie Capital Management LLC, object to the sale, arguing it undervalues Polaroid’s brand and threatens the companies’ liens against the trademarks. The judge will consider the objections at the sale approval hearing, said Lewis Phelps, a spokesman for Ritchie.

“The incremental value achieved from today’s auction process is immaterial compared to the value that could be achieved through a reorganization of Polaroid,” Phelps said today in a phone interview. “Holding the auction at all is not the best way to maximize the value of Polaroid’s assets, which is primarily its trademarks.”

The creditors claim Polaroid’s brand is worth as much as $266 million in North America and as much as $380 million in Europe. Ritchie says its liens on the brand in Brazil, China and India are worth more than $300 million. Polaroid has sued to challenge the liens.

Polaroid filed lists of assets and debt showing property with a value of $28.5 million and liabilities totaling $302 million, including $72.8 million in secured claims.

Polaroid sought Chapter 11 protection in December amid allegations that its owner since 2005, the investment firm Petters Group Worldwide LLC, was running a $3 billion Ponzi scheme that targeted hedge funds.

The firm’s founder, Thomas Petters, was charged with mail fraud, wire fraud and money laundering. His trial is scheduled to begin June 9.

The case is In re Polaroid Corp., 08-46617, U.S. Bankruptcy Court, District of Minnesota (Minneapolis).

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net.

Last Updated: April 16, 2009 17:59 EDT