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Dive Brief:
- Hardware store True Value filed for Chapter 11 bankruptcy protection in Delaware on Monday, according to a press release. In court documents, True Value claimed assets of $100 million to $500 million and liabilities of $500 million to $1 billion.
- True Value is seeking court approval to sell “substantially all of the company’s business operations” to rival Do it Best Corp. for a stalking horse bid of $153 million in cash consideration. However, all True Value stores but one are independently owned and therefore not a part of the Chapter 11 case.
- In order to maintain regular business operations, True Value wants to use its cash collateral. If additional financing is necessary during the process, Do it Best has committed to providing incremental capital, according to True Value’s announcement.
Dive Insight:
With about three months left, True Value joins a growing list of retailers — 99 Cents Only, Conn’s and Big Lots among them — that have sought Chapter 11 protection this year.
Court documents show that True Value’s top five creditors are owed over $35.6 million. They include outdoor power equipment manufacturer Stihl and power tool maker Stanley Black & Decker.
Ahead of the bankruptcy filing, True Value had “faced significant liquidity challenges,” the company said in court documents. In response, True Value retained financial restructuring company Houlihan Lokey in May to begin exploring strategic options. To address its challenges before opting for bankruptcy, True Value this year said it also worked to modernize its legacy operations, invest in marketing campaigns and drive greater efficiencies.
True Value CEO Chris Kempa said Monday in a statement that selling the business represents the best path forward. “We believe that entering the process with an agreed offer from Do it Best, who has a similar decades-long history in the home improvement space and also operates with a focus on supporting members and helping them grow, is the most beneficial next step for True Value and our associates, customers and vendor partners,” Kempa said.
Terms of the initial bid from Do it Best include the assumption of contracts and up to $45 million of trade payables, along with employment offers to an unstated number of True Value employees upon the sale’s closing.
If approved, Do it Best said the deal would create a global store network of over 8,000 U.S. locations and a presence in 50 countries, according to a separate press release on the deal. The move also would “provide True Value and independent hardware stores the strongest opportunities for growth for years to come,” Do it Best CEO Dan Starr said in a statement. True Value is asking the court to consider competing bids until Nov. 18.
Based in Chicago, the True Value brand has existed for over 75 years. The wholesaler says it serves about 4,500 independently owned and operated stores globally with customized assortments that include lumber and building materials; outdoor living and tools; and plumbing and heating. Private equity firm Acon Investments acquired a 70% controlling stake in True Value in 2018.
Do it Best is based in Fort Wayne, Indiana, and describes itself as a member-owned buying cooperative. The company reported $4.57 billion in sales for its fiscal year ending June 29. “Although this was 4% below the previous year, it demonstrates our ability to outperform the market in less-than-favorable conditions,” Starr said in a September press release.
via https://www.aiupnow.com
Nate Delesline III, Khareem Sudlow
