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Bernstein: Foreclosures remain a thorn

BY HBSDEALER Staff

New York-based research firm Sanford C. Bernstein recently held a teleconference explaining its view of the recovery of the home improvement retail market. Colin McGranahan, a senior analyst for the firm, pointed to foreclosure pressure on home prices and suggested the likelihood of three million to five million additional foreclosures in the coming years.

“Essentially that’s another year’s supply of foreclosure inventory that’s likely to hit the market over the course of the next year or two,” he said. “And our take on this is that this is a persistent issue which is suppressing, probably more than anything else, home prices.”

Significant drops in home prices are also having a big effect on the home improvement market, with 24% of mortgage holders having negative equity in their homes, according to McGranahan.

“When you think about home improvement, there’s obviously a big chunk of it, we think around 50% of it, that’s really remodeling. It’s big-ticket additions and alterations. It’s heavily dependent on home equity withdrawal to fund it,” he said.

He also said that those who do have equity in their homes would have difficulty extracting it.

“The ability to actually extract credit even if you do have equity is fairly limited,” he said. “You have to have greater than 30% equity in your home today to even be able to talk about doing a home equity loan.”

Ultimately, McGranahan said real home prices are not likely to increase significantly for some time.

“The historical precedent here would suggest that real home prices are likely to go sideways at least in the next several years if not the next decade,” he said.

“So tying that to home improvement, we think while the housing market is in a choppy and sustaining recovery, we’re likely in a situation where we’re in a fairly lackluster home price appreciation going forward, and that’s going to have an impact on the slope of recovery for home improvement,” he said.

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Stock completes NHC acquisition

BY HBSDEALER Staff

Stock Building Supply announced it completed the acquisition of National Home Centers, a supplier of building materials in Arkansas.

“We are pleased to complete this transaction and look forward to working with our new colleagues in central and northwest Arkansas,” said Joe Appelmann, Stock president and CEO. “Stock transformed its operating model over the past year to become a leaner, more focused organization. This process has allowed us to seize significant opportunities like National Home Centers. We will continue to explore intelligent growth options both in our core markets and elsewhere if opportunities arise.”

Since The Gores Group acquired a majority stake in Stock in May 2009, the company has pointed to a strategy of using the downturn in new construction to restructure its operations and strengthen its finances.

Dwain Newman, former chairman and CEO of National Home Centers, stated, “Today is an exciting milestone for National Home Centers. We are proud to be part of a company with a strong financial position and a promising future. Stock has a strong record of improving its own operations despite difficult market conditions, and this transaction will allow National Home Centers to realize its full capabilities. The partnership with Stock allows us to remain fully committed to serving our customers with quality products and services.”

Ken Greene has been appointed market manager for Stock’s Arkansas operations. Greene has served in numerous positions within Stock, including key posts in operations and sourcing.  

Today Stock operates in 19 markets.

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Ceiling fan companies in takeover battle

BY HBSDEALER Staff

Two Texas manufacturers are locked in battle over an unsolicited tender offer that would merge the two companies into one. Litex Industries, of Grand Prairie, Texas, has launched a bid to purchase all the outstanding shares of common stock of Craftmade International, based in Coppell, Texas.

Both companies make or import ceiling fans and lighting fixtures. Craftmade has also expanded into outdoor furniture. The two companies are headquartered just outside of Dallas.   

In its most recent letter to its shareholders, dated March 31, Craftmade recommended that they reject Litex’s offer of $5.25 a share. “Litex has engaged in an aggressive campaign to buy Craftmade at a bargain price,” said the letter, a copy of which is on file with the Securities and Exchange Commission. Craftmade accuses Litex of misrepresenting its willingness to negotiate, its financial difficulties, and its executive compensation.

In a March 31 news release, Litex refutes these claims. It accuses the Craftmade board of directors of putting its own interests before that of the company’s. Litex maintains that $5.25 is a fair per-share value, and it reiterates its tender offer, which expires on April 7.  

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