It’s a deal: True Value agrees to sale
A special meeting of the True Value board of directors Friday morning announced the results of a proxy vote, and it wasn’t close. In management’s final tally, True Value members voted 85% to pass the deal, which will turn over 70% equity of True Value Company to ACON Investments. Current True Value members will keep 30% equity, as well as receive a $196 million cash payout.
The announcement Friday morning marked the culmination of a process that began March 15, when True Value announced its intention, with the unanimous support of True Value’s board of directors, to enter into the deal with the Washington, D.C.-based private equity company.
“We’re excited about the overwhelming, positive response that we got from our shareholders, they have been the decision makers in this process,” said John Hartmann, True Value CEO.
From the beginning, True Value management has promoted the transaction as a growth strategy. An opportunity, as Hartmann said in the March 15 announcement, “to unlock the substantial majority of their investment while accelerating the transformation of the company to better serve our customers.”
When the deal is finally signed and sealed, as is expected in the coming days, the following key provisions of the plan kick in:
- ACON will acquire 70% of the company, with 30% equity retained by members
- True Value members will receive $229 million in returns and credits. Of that, $196 million will be paid in cash.
- True Value will cease to exist as a co-op and will begin to exist as a nationally branded wholesale distributor.
The vote was a landslide that overcame a vocal minority of True Value members who opposed the deal. Organized resistance to the proposal gravitated to the web page “Concerned True Value Members” on Facebook.
Asked about the criticism on that page, Hartmann pointed to the strong support of the plan reflected in the vote. “Everyone is entitled to their opinion, but what really matters is the vote. In the end everyone is a part of the True Value family, and this was not a 51-49 thing.” He added. “I don’t really care who voted [for or against]. My team and I need to continue to earn our members business every day.”
Despite the dramatic change in structure created by the vote, Hartmann says the dealer-distributor relationship will remain the same, with business as usual, for at least the near future. Any dealer currently using the brand can continue to use it. In the future, a minimum-purchase threshold will entitle dealers to use the True Value brand in the store and in local media, as well as participation in the True Value e-commerce ship to store program.
Hartmann added that True Value dealers have already discussed plans to use the release of the equity in the next couple of weeks to reinvest in their business, or happily make a bank deposit with their money, he said.
“We believe we’ve been responsive to our shareholders’ questions about all of these things,” he said. “We’re very excited about the future and about helping them to continue to grow.”
In a prepared statement, Aron Schwartz, managing partner of ACON said: “True Value is an iconic brand and one that we have long admired. We believe that independent hardware retailers are an essential part of our society, providing consumers and communities with unrivalled service and expertise. We share True Value’s passion for helping to ensure that the independent hardware retailer thrives for decades to come, even as times change and the competition gets tougher.”
True Value nation awaits results
These are pivotal times for the True Value Company. The results of the membership’s vote on the Chicago-based co-op’s deal with ACON Investments are expected to be announced Friday, April 20.
As of press time, the signs pointed to a high probability of the deal passing, bringing an end to the long history of True Value as a co-op. The deal would also result in the sale of 70% of the company and the return to member shareholders of $229 million.
True Value’s headquarters released an early tally of the votes on April 13. In the tally, 85% of the members had voted for the proposal after 72% of the proxies had been counted. That announcement followed a 15-stop bus tour in which CEO John Hartmann led “town hall” discussions about the proposed deal. True Value described the meetings as successful and positive.
One dealer who attended the Manchester, N.H., meeting, Tom Cost Jr. of Killingworth (Conn.) True Value, described the attitude of the dealer attendees this way: “I think the mood has swung from very upset and frustrated, to mildly concerned and cautiously optimistic,” he told HBSDealer.
The ACON Investments deal is supported unanimously by the True Value board of directors.
But signs of a lingering opposition were readily apparent on a Facebook page called Concerned True Value Members. The site contains criticisms of the deal and the amount of time and information members were given to consider the deal. The page also shows organized efforts to convert voters from “yes” to “no” — including votes already cast. It’s unclear if those efforts swayed significant numbers of votes.
Particularly outspoken in opposition is Richard Reese, owner of True Value member Standard Plumbing in Sandy, Utah. Reese brought a lawsuit to block the deal to the Delaware Chancery Court. The suit failed to sink the deal, but did result in extending the voting a week, as management provided additional information related to the transaction.
Still the co-op management expressed confidence that the deal would go forward. A special meeting was slated for April 20, when the board of True Value will announce the results of the vote. “Based on the massive vote support, our plan remains to close the transaction on or around April 20th, following the special meeting,” John Hartmann wrote in a statement to members.
Leaning to ‘yes,’ True Value voting extended
As True Value members consider an offer to sell 70% equity of the company to ACON Investments, Chicago-based True Value Company has added a week to the voting deadline.
Early Friday, the company announced to members that special meeting of the board on April 20 will share the voting results with the members. The original vote deadline was April 12, just before midnight. It’s now April 19, just before midnight.
So far, votes have been largely in favor of the proposal announced March 15 to dramatically change the structure of the True Value, sell a majority stake to a private equity company and unlock dealers investment. The company said 72% of the proxies have been counted, and 85% have voted for the proposal.
In an announcement to dealers today, the co-op said: “based on the massive vote support, our plan remains to close the transaction on or around April 20th following the Special Meeting.”
The additional week was described in a statement as related to a lawsuit brought by a member who sought more information. The lawsuit was rejected by the Delaware Court Friday morning, True Value said.
True Value’s statement reads:
“As of today, we are pleased to report that we have received a majority member vote with 72% of the proxies voted and 85% voted YES to the proposed transaction. Although we have already achieved the required vote, we supplemented information to the Proxy in response to certain litigation relating to the Transaction by one member. As required legally when providing additional information, we extended the proxy period by one week to April 20. In a ruling on the lawsuit today, the Delaware Court rejected the relief sought in the complaint to stop the transaction and based on the massive vote support, our plan remains to close the transaction on or around April 20th following the Special Meeting.”
According to a report in Law360, the Delaware Chancery Court suit was filed last week seeking to block the transaction and alleging that terms were inadequately disclosed and the price was unfair.