Sears makes offer for Restoration Hardware
Following an announcement by specialty home decor retailer Restoration Hardware to enter into an acquisition agreement with a private equity firm, Sears Holdings has made a bid for the financially struggling retailer.
Sears Holdings has offered $6.75 per share for the mid-to-high-end retailer, a higher bid than the $6.70 per share offer from private equity firm Catterton Partners. Sears currently owns a 13.7 percent stake in Restoration Hardware.
Restoration Hardware, however, has said it is unwilling to enter into a confidentiality agreement requested by Sears. In a letter to Restoration Hardware, accompanying a filing with the Securities and Exchange Commission, Sears requested the retailer provide some non-public information and additionally enter into a confidentiality agreement over that information.
Today, Restoration Hardware said it would go forward with providing information to Sears as long as Sears will agree to execute the customary confidentiality and standstill agreement on substantially the same terms that other parties have signed.
“While we do not understand your requirement that we submit such a proposal prior to providing us with due diligence information,” Sears said in the letter, “we are prepared to inform you that, based on the public information currently available to us, we would be prepared to enter into an agreement to offer your stockholders $6.75 per share in cash via tender offer.”
Restoration Hardware announced earlier this month a planned sale to Catterton Partners for $267 million. The retailers said the move would take Restoration Hardware private.
Restoration Hardware has seen several quarters of weakness due to an ultra-competitive home decor and furnishings environment. Strong competition from similar retailers, including Pottery Barn, Williams-Sonoma Home, West Elm, Pier 1 and Design Within Reach, combined with a downturn in the housing sector, led to losses in the company’s most recent fiscal quarter.
In August, Restoration Hardware announced it would cut 100 jobs at the company’s Corte Madera, Calif.-based headquarters in order to save $9 million annually. In its second quarter, the company swung to a $5.5 million loss from $2.2 million in earnings last year.
Sales rose 2.2 percent to $183.8 million compared with $179.3 million last year.
Restoration Hardware has approximately 100 retail stores and eight outlet stores in 30 states, Washington, D.C., and Canada.
Philips to acquire lighting fixtures maker Genlyte
Royal Philips Electronics, one of the world’s largest manufacturers of light bulbs, will acquire lighting fixtures maker Genlyte Group in a $2.7 billion deal. According to Bloomberg, this is Philips’ largest acquisition ever in terms of cost.
Genlyte Group, based in Louisville, Ky., makes fixtures under numerous brand names including Alkco, Lite-Energy, Nessen and Morlite. The deal is expected to help increase the energy-saving selection offered by Philips, as well as to help the manufacturer expand further in the United States.
“This deal deepens our contacts to end users, helping us speed up the market rollout of more energy-efficient lighting and the introduction of new lighting technologies, like solid state lighting,” said Philips CEO Theo van Deursen.
Amsterdam-based Philips said it expects the transaction to close in the first quarter of 2008. Genlyte will be integrated into the luminaries business of Philips’ lighting division.
Philips lighting division accounts for about 20 percent of the company’s annual sales, which were $40.1 billion in 2006.
Coast-to-coast LBM trend watch
LBM dealers are facing challenging markets and making major decisions from one end of the country to the other. But the details and the markets vary tremendously depending on geography and local market conditions. In the following examples, we discuss some regional microtrends affecting how pro dealers are going after business.
• Midwest: Homeowners are pulling back from discretionary remodeling projects, and retailers are feeling the pinch in the kitchen and bath departments. But most people won’t put off replacing their roofs. A 2006 survey of U.S. households by the Home Improvement Research Institute found purchasing declines in 10 out of 14 building material categories. But spending on roofing products remained unchanged.
• Northeast: Although northeastern builders were among the early adopters of I-joists, home builders in New York, New Jersey and other East Coast cities were not as quick to adopt laminated veneer lumber (LVL) beams and other engineered wood products (EWP) in place of dimensional lumber. But as these builders find themselves working on more multi-family projects — dictated by both the economy and the availability of open land — many are finding EWP to be a good choice.
• Northwest: Manufacturers of insulation, moisture barriers and anti-mold products are learning how to work in tandem, often in public-private groups like the Partnership for Advancing Technology in Housing (PATH), an organization that includes, along with home builders and government agencies, representatives from DuPont, Andersen Windows, Armstrong World Industries, CertainTeed, Arxx Building Products, Louisiana-Pacific, Advanced Wall Systems and General Electric.
• Southwest: KB Home offers “TechShield,” a radiant barrier made by Louisiana-Pacific (LP), to homeowners throughout the Sunbelt states. In 2007, nearly one in two home buyers in those markets chose that option, according to the Los Angeles home builder. In some markets the acceptance rate was more than 80 percent.
• Southeast: One of the aftereffects of Hurricane Katrina has been a rush of new building codes in southern Louisiana and Mississippi. Among other mandates, cities and counties are requiring that new housing built in “velocity zones” can withstand high winds. But Gulf Coast home builders need only look east, to the state of Florida, where local authorities have laid down some of the most stringent hurricane-related codes.