By Craig Webb, President, Webb Analytics
Do it Best announced Nov. 22 the signing of a purchase agreement to acquire True Value Co., creating what it calls "the world's largest network of independent home improvement stores."
Roughly 500 of True Value's 4,500 dealers already were doing business with Do it Best. Thus, the acquisition of the longtime rival brings up to 4,000 new dealers and up to $1.5 billion more purchasing power to Do it Best, whose 4,500 members purchased $4.57 billion worth of goods in the fiscal year ended June 30. The actual gains in numbers and purchases won't be known for many months, because other distributors--particularly Orgill and Ace--have been actively wooing True Value dealers to join them instead.
Do it Best said that, "for now," it will operate True Value as a separate subsidiary, thus avoiding any significant impact on Do it Best members' annual rebates. Do it Best also named a new leadership team for True Value.
(Click here to see Webb Analytics' ongoing coverage of this story since its start.)
Growing Pains
Buying True Value out of Chapter 11 bankruptcy gives Do it Best a growth spurt that President and CEO Dan Starr says couldn't be achieved organically. But that growth spurt also creates growing pains, as Do it Best will have to figure out what to do with True Value's 12 distribution centers (at least five of which overlap with Do it Best DCs), its 1,950 employees, and above all its relations with True Value's vendors.
Aside from paying at least $153 million in cash to acquire True Value, it has committed to pay only up to $45 million to assume trade receivables. As of early Nov. 22, a total of 1,304 vendors have submitted to federal Bankruptcy Court claims totaling $151.9 million, of which $137.2 million are unsecured. For many vendors that have sold to both True Value and Do it Best, the next round of discussions with Do it Best are likely to be much different.
In a recent Do it Best podcast, Starr said a big focus in the near term at True Value will be to "stabilize the operations and get them right, which means attacking their costs in those operations."
"We're not going to be bashful at all about attacking that directly," Starr said, citing in particular the distribution centers and personnel costs. "There's no gentle way to put it: You have to address those things."
In the Nov. 22 news release, Starr said: “We’re focused on taking our time to get it right. We ask for patience as we integrate True Value and help everyone grow and achieve their dreams.”
Who's in Charge
Do it Best's organization chart now will have two unit presidents, with Nick Talarico serving as President of Do it Best and Dent Johnson becoming President of True Value. Here is the new leadership team at the True Value division:
● Bill Habegger, Vice President of Information Technology
● Justin Hanford, Vice President of Merchandising
● Eric Lane, Senior Vice President of Marketing
● Tim Miller, Senior Vice President of Logistics & Distribution
● Chris Okapal, Vice President of Sales & Business Development
● Steve Rose, Vice President of Distribution
● Matt Saines, Vice President of Finance
● Rob Schmiedel, Vice President of Operations & Sales Enablement
● Ken Sorg, Vice President of Supply Chain
● Celeste Stevens, Vice President of Human Resources
● John Vanderpool, Senior Vice President of Manufacturing
● Jenna Grannan, Director of Marketing
● Randy Rusk, Director of Communications
Of that group, only Eric Lane and John Vanderpool are from the old True Value.
Rescuing the TV Brand
Do it Best's purchase restores to co-op status a True Value organization that had been 70% owned by a private equity firm, Acon Investments. "We get to maintain our independence while working with a partner committed to our success," said Lee Kuenning, whose family owns four True Value store in Western Ohio and was chairman of True Value's co-op board. "We get to return to a co-op, one that is financially strong, truly cares, and is here to hear our thoughts and our opinions."
Numerous court filings indicated that True Value had been in perilous shape much of this year and was surviving primarily because of $238 million in credit it enjoyed from a consortium of lenders. Over the summer, True Value stopped or was overly slow paying drop-ship customers. By early October, hundreds of vendors had put holds on True Value's credits. "Management believes the company is on the brink of collapse," an attorney for True Value told the lenders on Oct. 4.
True Value's filings to the bankruptcy court said TV was hurt by supply chain disruptions during the COVID epidemic, causing sales to decline 8% in 2023 and another 14% year-over-year through August 2024.
“If your planning isn’t under control, your costs are also going to be out of control,” Jeff Pehler, partner at business management consulting firm West Monroe, told Crain's Chicago Business. “... They weren’t able to live up to the structure of what was needed to support them. Especially when the tailwinds became headwinds.”
Starting around September, True Value's leaders hired companies to give a liquidation value of the company and solicit potential buyers. Do it Best stepped up and signed an initial purchase agreement, making it the "stalking horse"--i.e., the lead candidate--when True Value filed Oct. 14 for protection for creditors under Chapter 11 of federal bankruptcy law. As it turned out, nobody else put in a bid.
True Value's lenders preferred liquidation and fought to claw back as much of their credit arrangement as possible. Ultimately, they settled for an agreement in which Do it Best would backstop True Value for up to $10 million if the company didn't have that much left in its accounts on selling day. That $10 million plus the $153 million Do it Best is paying means the lenders ultimately lost roughly $75 million from True Value's demise.
About Being No. 1 ...
While the sub-headline of Do it Best's news release said DIB is now the world's largest network of "independent home improvement stores," it quotes Starr later on as expressing price in being "the world's largest cooperative in our space."
A Do it Best official told Webb Analytics that DIB figures it is No. 1 because it's bigger now than Ace, which has 5,900 members in 60 countries. Do it Best definitely has become more international, growing to 65 countries served.
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