True Value Makes a Deal
True Value Company announced a transaction with private equity firm ACON Investments that will return $229 million to True Value retailers. Under the deal, True Value retailers will retain 30% of the company.
The move is described by True Value Company as a deal to “accelerate transformation of True Value Business.” In effect, it will also convert the structure of the company from a co-op selling products to its member owners, into a distributor selling products to any and all customers.
Under the terms of the agreement, ACON will make a strategic investment in the new True Value operating company. ACON’s investment will result in current True Value retailers having 70% of their invested capital, 100% of their promissory notes and the 2017 Patronage Dividend repaid following close. This represents approximately $229 million in returns and credits to current True Value retailers, who will also retain a 30% holding in the new True Value Company.
True Value explained there will no longer be a requirement to purchase stock to be able to purchase products from True Value, freeing up its members’ and customers’ capital. “As the only branded national wholesaler without a membership requirement, True Value will lead the modernization of the business model in this channel,” said John Hartmann, president and CEO of True Value.
The board of True Value is unanimously recommending this transaction, the company said. Hartmann said he was confident that current retail members will support this initiative.
ACON Managing Partner Aron Schwartz issued the following statement: “We have long admired the iconic True Value brand and have been impressed with the robust business that its retailers and support team have built together,” Schwartz said. “We strongly believe in the future of the independent hardware retailer and fully support the strategy that John and the rest of the True Value team have put in place. We look forward to working with True Value’s current leadership team to accelerate this strategy and better support retailers’ independence, growth and profitability.”
The nuts and bolts of the return of the invested capital to retailers was described this way: “Current True Value retailers will have 70% of their A & B stock (~$136 million) and 100% of promissory notes (~$72 million) repaid along with the 2017 Patronage Dividend of $20.6 million following the close of the transaction, representing a return of approximately $229 million to invest how they know best. Of that total, approximately $196 million will be paid in cash and approximately $32.7 million will be credited to eliminate amounts owed to the company.”
Rumors of a True Value sale or some other structural change percolated in July of last year when reports of a possible sale of the company were raised by Bloomberg News.
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