Private equity snaps up True Value

Dive Brief:

True Value Co. and private equity firm Acon Investments on Friday announced that Acon would acquire a 70% controlling stake in the hardware chain.
True Value retailer-owners will receive $230 million in returns and credits — 70% of their invested capital and 100% of their promissory notes on top of their 2017 patronage dividend, the companies said. True Value's existing management team will remain.
The deal, which was overwhelmingly approved by shareholders Friday morning according to the Chicago Tribune, dissolves the cooperative ownership structure, though True Value retailers retain a 30% holding in the new company, according to a press release from the companies.

Dive Insight:

True Value operates in a category that has enjoyed the benefits of a continually improving housing market and has been relatively insulated from e-commerce's rise, though the opportunity has also meant fierce competition from the likes of Lowe's, Menards, Home Depot and Ace Hardware. Rival chain Ace, which previously was reported to be interested in buying True Value, last year expanded its own e-commerce operations with the acquisiition of in e-commerce curation retailer the Grommet.

The hardware co-op has reportedly been exploring a possible transaction since last summer. In an interview last month with Retail Dive, True Value CEO John Hartmann said that True Value's owner-retailers could use the proceeds from the buyout to remodel their stores and invest in merchandising and other improvements. But there are no strings attached to the equity sale, according to Hartmann, so they could also pocket it.

Along with a buyout of company stock and notes, he said that Acon brings "deep expertise" in wholesale, retail and manufacturing — all important pieces of True Value's business. With the dismantling of the co-op structure, the deal essentially turns True Value into a wholesale distributor.

But in a statement last week, Acon managing partner Aron Schwartz said the firm is focused on the chain's legacy of independently owned businesses. "We believe that independent hardware retailers are an essential part of our society, providing consumers and communities with unrivaled service and expertise," he said. "We share True Value’s passion for helping to ensure that the independent hardware retailer thrives for decades to come, even as times change and the competition gets tougher."