True Value vote looms large

BY Ken Clark

A bus decked out with the True Value logo and a sign that reads “Tools for Transformation” has been roaming the highways on a mission – to explain the choice faced by dealers that could dramatically change True Value, or not. At issue is the structure of the co-op, the future of the brand as a distributor, and the liquidity of shareholder’s equity tied up in stock.

As reported March 15, The 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, with 70% equity going to ACON. The deal will result in current True Value retailers taking 70% of their invested capital, 100% of their promissory notes and the 2017 Patronage Dividend repaid following close. The move is described by True Value Company as a deal to “accelerate transformation of True Value Business.” 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.

In an article that appeared in the Chicago Tribune, Hartmann is quoted: “The concept of a co-op, which I’m very respectful of even though I’ve asked shareholders to move away from that, is that individuals came together as a group to do things they couldn’t do on their own. The unfortunate thing is it traps their investment, their equity, in the company.”

The plan to bring in ACON Investments as a majority owner has led to a wide range of opinion within True Value’s family, and throughout the industry.

Among the True Value dealers showing enthusiasm for the deal is Steve Fusek. He posted the following on a popular industry bulletin board: “Not sure how this can be a bad deal, especially for members of the coop. We get paid our $229 million to control ourselves. No risk of accounting errors, etc. How can that be bad?” The elimination of debt and the ability of the company to invest in itself were also cited as positives by Fusek.

“I have yet to speak with a member that did not think this was in the member’s best interest,” he posted.

In a network of some 4,000-plus dealers, not everyone is in agreement.

Tom Cost, Jr., of Killingworth (Conn.) True Value was in attendance for the True Value tour’s meeting in Manchester, N.H. on March 21. “I think the mood has swung from very upset and frustrated, to mildly concerned and cautiously optimistic,” he told HBSDealer.

On Monday, Hartmann’s bus tour was in Mankato, Minn., for the tour’s 15th and final “Town Hall” meeting with dealers to explain the benefits. “Meetings were very successful at ensuring our members were fully informed to cast their vote,” said Jean Niemi, VP of communications for True Value Company, via e-mail. “Overwhelming majority have walked away feeling positive.”

The deadline for voting is just before midnight April 12. A simple majority is required to pass the proposal.


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