Lowe’s Cos., (LOW:US) the second-largest U.S. home-improvement retailer, agreed to pay $205 million to add at least 60 Orchard Supply Hardware stores in California after Orchard filed for bankruptcy relief.
The acquisition will provide the retailer with a smaller store format and give it access to a new customer base in California, where it already operates 110 outlets, Lowe’s said today in a statement. In addition to the cash purchase price, Lowe’s will assume amounts owed to nearly all of Orchard’s supplier partners.
Lowe’s said it wants to increase its number of stores in California as housing recovers. The retailer operates half as many stores in California as Home Depot Inc., helping explain why its comparable-stores sales trailed its larger rival in the first quarter, Chief Executive Officer Robert Niblock said in an interview May 22.
Orchard, which has 91 hardware and garden stores, listed assets of $441 million and liabilities of $480.1 million in Chapter 11 papers filed in U.S. Bankruptcy Court in Delaware today. Lowe’s said the offer will act as a “stalking horse bid” in an auction process, meaning it’s an agreement between the two parties for Orchard Supply to try to attract further bids.
Lowe’s will get a break-up fee of 3 percent of the purchase price if it fails to acquire Orchard’s assets, according to the statement. An alternative bidder must outbid the retailer by at least $12 million.
The bankruptcy case is In re Orchard Supply Hardware Stores Corp. (OSH:US), 13-11565, U.S. Bankruptcy Court, District of Delaware.
To contact the reporters on this story: Paul Jarvis in London at email@example.com; Andrea Tan in Singapore at firstname.lastname@example.org
To contact the editor responsible for this story: Douglas Wong at email@example.com