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True Value Announces Plans to Sell to Private Equity Firm

By Brigid Sweeney of Crain’s Chicago Business

True Value Company, which was rumored to be for sale last year, announced this month that it plans to sell a majority stake to Acon Investments, a private equity firm headquartered in Washington, D.C.

If approved, the deal will end the company’s 70-year stint as a cooperative, which dates back to 1948. The agreement would shift ownership from True Value’s 3,400 shareholders, who own and operate 4,400 stores across the U.S. and 59 other countries. If the deal goes forward, Acon would return $229 million to current True Value members.

The proposal, which has been blessed by True Value’s Board, but still needs approval from shareholders, would give Acon a 70 percent stake in a new True Value operating company. Current co-op members would retain a 30 percent stake, which would transition into stock holdings in the new entity.

In an interview, True Value CEO John Hartmann said the returned money would give store operators more financial flexibility.

“Our independent retailers operate in a very competitive space, so freeing up this capital is a really big deal,” he said. “It allows them to reinvest in their stores, modernize their stores, and invest in new stores.”

The deal would also eliminate True Value’s buy-in requirement for new members, which Hartmann said will benefit the company by creating more operator interest. “We anticipate this will accelerate our growth nationally and internationally,” he said.

The chain’s day-to-day operations at existing stores will not change, Hartmann said. Co-op members will continue to receive True Value merchandising and marketing support.

Acon’s investment was particularly attractive, Hartmann said, because the firm already has investments in wholesale, retail, and manufacturing—all three of which are part of True Value’s business. In addition to its retail locations and wholesale distribution arm, the company also operates a manufacturing facility for its branded paint.

Hartmann, who joined True Value in 2013, acknowledges the company’s members “have weathered some significant intrusions from very able competitors” including big-box home-improvement stores like Home Depot and Lowe’s. He also concedes the company is “not 100-percent insulated from Amazon”, but he’s still optimistic that True Value, which posted $364.4 million of revenue on $492.2 million of gross billings in the most recent quarter, has carved out a solid niche.

“Our stores are community based, very convenient, small retail,” he said. “A drone can’t get you a hammer any faster than you can get it from your local True Value, and it can’t mix your paint, either.”

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