Monday August 12th, 2013 - 10:47AM
Lowe’s Companies, Inc. today announced further progress in its plans to acquire the majority of assets of Orchard Supply Hardware, including 72 stores, for approximately $205 million in cash, plus the assumption of payables owed to nearly all of Orchard’s supplier partners, subject to bankruptcy court approval. Lowe’s has been advised by Orchard that no additional bids were received by the deadline of August 9. The transaction will be presented to the bankruptcy court for approval on August 20, 2013, and Lowe’s anticipates completing the acquisition by the end of August.
Lowe’s plans to have Orchard operate as a separate, standalone business, retaining its brand under the leadership of Orchard’s current management team. The home improvement retailer further noted that it plans to acquire the locations most complementary to its current strategy and store footprint.
Once completed, the acquisition will enable Lowe’s to expand its presence in California and reach a new customer base through the addition of Orchard’s smaller-format stores in densely populated areas. Orchard’s neighborhood hardware and garden stores offer a product selection focused on paint, repair and backyard categories in approximately 36,000 square feet of selling space, compared to 113,000 square feet of selling space for an average Lowe’s home improvement store. Lowe’s currently operates 110 stores in California.
As announced in June, Lowe’s had entered into a purchase agreement with Orchard that would serve as the stalking-horse bid in a bankruptcy court-supervised auction. Interested bidders were required to file initial bids with the court by August 9. Orchard initiated Chapter 11 proceedings in June in the U.S. Bankruptcy Court for the District of Delaware. Based in San Jose, California, Orchard reported annual revenue of $657 million for fiscal 2012.
In a separate press announcement from Orchard, the company noted that as part of its ongoing Chapter 11 process, it identified nine additional stores that will close. In addition to the 17 stores that are being closed as part of the Chapter 11 process, two stores have closed since the bankruptcy announcement. The company expects to continue operating its remaining 72 stores at the completion of the sale process.
Robert Niblock, chairman, president and CEO of Lowe’s, said, “We are very pleased to be moving forward with the acquisition process. Strategically, the transaction will provide Lowe’s with an attractive opportunity to increase our store footprint in California, where we are currently underpenetrated, through a neighborhood store format that is complementary to our strengths in big-box retail. We see significant potential for Orchard as a standalone business within Lowe’s portfolio.”