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Orchard Supply Hardware agrees to sell to Lowe’s

The store was burdened with debt under Sears ownership

Posted: June 17, 2013 5:00 p.m.
Updated: June 17, 2013 5:00 p.m.

Orchard Supply Hardware has reached agreement to be sold to Lowe's. Pictured is the Orchard Supply Hardware in Santa Clarita. Jana Adkins/The Signal

Orchard Supply Hardware Stores, a neighborhood hardware and garden store in Santa Clarita and around the state, announced Monday that it reached an agreement with Lowe’s home improvement to sell itself for $205 million in cash.

To make the sale of Orchard Supply Hardware Stores financially viable, it filed a voluntary Chapter 11 bankruptcy petition. The company has struggled financially since Sears purchased it in 1996 and overloaded it with debt in 2006, then sold it.

If the deal goes through, Lowe’s will assume the debts owed to Orchard’s suppliers.

Parties expect the transaction will close in approximately 90 days if another group does not outbid Lowe’s by a minimum of $12 million.

Under the terms of the transaction, Lowe’s would acquire at least 60 of the Orchard stores, Lowe’s said in a statement on Monday.

The purchase would allow Lowe’s to expand by using a new store format and reaching a new customer base in California, the company said.

Because the deal is only in the process of working through the U.S. Bankruptcy Court, the fate of Santa Clarita’s Orchard store isn’t yet known, said a spokesman for Lowe’s corporate headquarters.

The Santa Clarita Orchard Supply Hardware store on Bouquet Canyon Road sits across the street from a Lowe’s home improvement center.

“Lowe’s will be evaluating all the Orchard Hardware Stores to see what’s most complimentary to our strategy,” Julie Yenicheck told The Signal on Monday.

But, Yenicheck said, Lowe’s considers Orchard to have a different format and customer base, which affects any decisions about the local Orchard store.

“We don’t see it as creating an overlap by the two different businesses,” Yenicheck said.

Orchard, which generated revenue of $657 million in fiscal 2012, will operate as a separate, stand-alone business at the completion of the sale process, the company said.

It will, however, benefit from the financial stability of having a new corporate parent.

Orchard Supply went public in January 2012 and since then has reduced its debt and improved operations, but it did not believe it could meet the first debt repayments that will come due in December 2013.

“With the debt addressed through the Chapter 11 process and appropriate support from Lowe’s, we believe that Orchard will be positioned for profitable growth as a stand-alone business within our portfolio,” said Robert A. Niblock, chairman, president and CEO of Lowe’s.

Orchard closed up 30 cents Monday at $2.18 per share upon news of the sale. Lowe’s closed up 20 cents at $41.36 per share.



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