Ace points to strategy behind Westlake purchase
Oak Brook, Ill.-based Ace Hardware’s recent purchase of the 85-store Westlake Ace Hardware chain — the co-op’s largest customer — represented “good offense” and “good defense,” according to the co-op’s message to Ace retailers.
The $88 million purchase — roughly $1 million per location — prevents Ace’s competitors from gaining footholds in Westlake’s 33 markets, according to the internal message to dealers posted Dec. 18. “In a changing retail environment where competitors are buying and converting stores away from Ace, we have secured Ace’s largest customer … and in so doing have preserved the great Ace brand in each of these markets and locations,” according to the memo, undersigned by Ray Griffith, CEO, and John Venhuizen, president and chief operating officer.
The move also reflects a “good offense,” in that it allows the co-op to benefit from the management team of Westlake Ace Hardware. The co-op said Westlake Ace CEO George Smith will continue to lead Westlake, which will run independently of Ace Hardware Corp.
“We believe the acquisition of Westlake Ace, while not without risk, is a relatively low-risk investment with the potential for meaningful return,” wrote Griffith and Venhuizen.
The new Westlake Ace will be governed by a board of directors separate from Ace’s own corporate board. It will include Ace retailers Jim Ackroyd and Lori Terpstra, as well as Ace executives Venhuizen and Lori Bossman. Another director will be named later.
The memo also revealed that Westlake’s previous owner, the private equity firm Goldner Hawn Johnson & Morrison, had been trying to sell the 85-store chain for several months. The firm purchased Westlake Ace six years ago.
Co-op buys Westlake Ace Hardware
Ace Hardware Corp. acquired Lenexa, Kan.-based Westlake Ace Hardware for $88 million.
Westlake was named the HCN 2011 Retailer of the Year, and was featured in the May 2011 issue of Home Channel News. Since 2006, the company was owned by a private equity firm — Goldner Hawn Johnson and Morrison.
According to Ace Hardware, the agreement became official for business beginning Dec. 17. Under the deal, Ace becomes the sole owner of the 85-store chain located in 33 Midwest and Sunbelt markets.
Westlake Ace Hardware was founded in 1905 and became part of the Ace co-op in 1959.
Ace turns to Valspar, away from Ben Moore
Ace Hardware is in the final stages of inking a deal that will replace Benjamin Moore, its signature national brand, with a program from Valspar paint, HCN has learned.
“We can confirm that we signed an agreement with Ace, [and] we expect the transaction to close by the end of the calendar year,” said Mark Goldman, VP corporate communications for Valspar. Because the deal is not final, Goldman said he could not comment on the details of the program, including whether Ace’s two paint manufacturing plants are part of the negotiations.
When contacted by HCN, Kate Kirkpatrick, a spokeswoman for Ace, said: “We cannot disclose any information since we have not closed on the agreement yet.”
One person was free to talk about proposed change, however. Edward Klein, senior VP strategy and retailing for Benjamin Moore, told HCN that his company wanted to stay with its “selective distribution” business model. Ace, on the other hand, “[wanted] a national brand that they could sell in all their stores.”
“We’re committed to retailers who are committed to paint,” explained Klein, who helped set up the initial program with Ace in 2005. Klein estimated that Benjamin Moore currently supplies 1,400 to 1,500 of Ace’s dealers, which number approximately 4,000.
These Ace/Ben Moore dealers received a Dec. 7 letter signed by Klein and three other company executives pledging to continue the program. “We are more than prepared to work with these retailers on a direct basis,” Klein said. “We’re evaluating ways to supply them and handle shipping to smaller stores.”
Benjamin Moore also recently struck a deal to supply paint to San Jose, Calif.-based Orchard Supply Hardware. And at the recent True Value Fall Market, Benjamin Moore had a booth where it promoted a billing arrangement with True Value retailers.