Lowe’s Companies, Inc. (NYSE:LOW), the world’s second largest home improvement retailer, today announced that its acquisition of the majority of assets of Orchard Supply Hardware has been approved by the U.S. Bankruptcy Court for the District of Delaware. Under the terms of the transaction, Lowe’s will acquire 72 Orchard stores for approximately $205 million in cash, plus the assumption of payables owed to nearly all of Orchard’s supplier partners. Lowe’s expects to close the transaction by the end of August.
Once completed, the acquisition will enable Lowe’s to expand its presence and reach a new customer base in California, where Lowe’s is currently underpenetrated, positioning the Company to more fully participate in California’s economic recovery.
Lowe’s said Orchard will operate as a separate, standalone business, retaining its brand and its San Jose headquarters.
Lowe's also announced that upon closing, Richard D. Maltsbarger, Lowe’s executive who led the team to acquire Orchard, will become President of Orchard. Orchard’s current President and CEO Mark Baker has informed Lowe’s of his decision to accept a position as President and CEO of the Aircraft Owners and Pilots Association following the closing. Maltsbarger will work closely with Orchard’s strong and seasoned team of executives led by Steven L. Mahurin, chief retail officer, and Chris D. Newman, chief financial officer and head of development. Upon closing, Mahurin will be responsible for Orchard’s merchandising, marketing and store operations, and Newman will have responsibility for finance, information technology and ecommerce, supply chain and loss prevention. Maltsbarger will continue to report to Lowe’s Chairman, President and CEO, Robert A. Niblock.
“We are confident that Orchard’s talented management team, led by Richard Maltsbarger, will continue to execute their successful repositioning strategy and deliver long-term profitable growth,” said Niblock. "We look forward to completing the transaction and welcoming Orchard to the Lowe’s family of businesses."
Located in high-density, prime locations that are difficult for larger format retailers to enter, Orchard’s smaller-format “neighborhood” stores are a natural complement to Lowe’s strengths in big-box retail. Orchard’s hardware and backyard 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 on June 17, 2013, Lowe’s entered into a purchase agreement with Orchard that served as the “stalking-horse bid” in a Bankruptcy Court-supervised auction under Section 363 of the U.S. Bankruptcy Code. No other bids were received by the Court mandated deadline of August 9, 2013. Orchard initiated Chapter 11 proceedings on June 17, 2013 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.
Goldman Sachs is acting as financial advisor to Lowe’s, while Hunton & Williams LLP is acting as legal advisor.
With fiscal year 2012 sales of $50.5 billion, Lowe’s Companies, Inc. is a FORTUNE® 100 company that serves approximately 15 million customers a week at more than 1,750 home improvement stores in the United States, Canada and Mexico. Founded in 1946 and based in Mooresville, N.C., Lowe’s is the second-largest home improvement retailer in the world. For more information, visit Lowes.com.
Disclosure Regarding Forward-Looking Statements
This news release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Statements of the Company’s expectations for sales growth, comparable sales, earnings and performance, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, the Company’s strategic initiatives and any statement of an assumption underlying any of the foregoing, constitute “forward-looking statements” under the Act. Although we believe that the expectations, opinions, projections, and comments reflected in these forward-looking statements are reasonable, we can give no assurance that such statements will prove to be correct. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by our forward-looking statements including, but not limited to, changes in general economic conditions, such as continued high rates of unemployment, interest rate and currency fluctuations, higher fuel and other energy costs, slower growth in personal income, changes in consumer spending, changes in the rate of housing turnover, the availability and increasing regulation of consumer credit and of mortgage financing, inflation or deflation of commodity prices, and other factors which can negatively affect our customers, as well as our ability to: (i) respond to adverse trends in the housing industry, such as the psychological effects of lower home prices, and in the level of repairs, remodeling, and additions to existing homes, as well as a general reduction in commercial building activity; (ii) secure, develop, and otherwise implement new technologies and processes designed to enhance our efficiency and competitiveness; (iii) attract, train, and retain highly-qualified associates; (iv) manage our business effectively as we adapt our traditional operating model to meet the changing expectations of our customers; (v) to maintain, improve, upgrade and protect our critical information systems; (vi) respond to fluctuations in the prices and availability of services, supplies, and products; (vii) respond to the growth and impact of competition; (viii) address changes in existing or new laws or regulations that affect consumer credit, employment/labor, trade, product safety, transportation/logistics, energy costs, health care, tax or environmental issues; and (ix) respond to unanticipated weather conditions that could adversely affect sales. In addition, we could experience additional impairment losses if the actual results of our operating stores are not consistent with the assumptions and judgments we have made in estimating future cash flows and determining asset fair values. Additionally, the following factors, among others, could cause actual results, financial results and timing of certain events to differ materially from those described in forward-looking statements: failure of the proposed transaction to be implemented; the challenges and costs of closing and integrating operations; the ability to retain key employees of the target company; and risks inherent in seeking regulatory and judicial approval of the transaction. For more information about these and other risks and uncertainties that we are exposed to, you should read the “Risk Factors” and “Critical Accounting Policies and Estimates” included in our Annual Report on Form 10-K to the United States Securities and Exchange Commission (the “SEC”) and the description of material changes therein or updated version thereof, if any, included in our Quarterly Reports on Form 10-Q.
The forward-looking statements contained in this news release are based upon data available as of the date of this release or other specified date and speak only as of such date. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf about any of the matters covered in this release are qualified by these cautionary statements and the “Risk Factors” included in our Annual Report on Form 10-K to the SEC and the description of material changes, if any, therein included in our Quarterly Reports on Form 10-Q. We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, change in circumstances, future events, or otherwise.
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