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The retail chain spun off from Sears in 2011.
Lowe’s Cos. Inc. said today it has agreed to buy about two-thirds of the stores operated by Orchard Supply Hardware Stores Corp., which earlier in the day filed for bankruptcy.
Lowe’s, No. 44 in the Internet Retailer Top 500 Guide, says if it is the winning bidder in bankruptcy proceedings, it “would acquire the majority of Orchard’s assets” for about $205 million in cash, and pay off the chain’s suppliers.
The tool seller, spun off by Sears Holdings Corp. in 2011, also operates an e-commerce site along with 91 stores primarily in densely populated areas of California. Lowe’s says it would buy at least 60 of those stores.
Lowe’s offered what is known as a “stalking-horse bid,” setting a floor for other bidders for Orchard’s assets. Lowe’s said it expects the deal to close in about 90 days.
Orchard launched its e-commerce site in 2010. Lowe’s did not say what would happen to the e-commerce site, but did say it would keep Orchard as a “separate, standalone business” under the charge of current management. "While it’s too early to speculate about what may happen in the future, the decisions about the e-commerce site would be decisions for Orchard’s management team," a Lowe's spokesman says.
Sears, No. 6 in the Top 500, bought Orchard Supply Hardware in 1996. Orchard had revenue of $675 million in 2012. It says it cannot keep up with debt payments. The company says it has liabilities of at least $480 million and assets valued at about $441 million.
Lowe’s operates 1,750 stores in North America.
“Orchard’s neighborhood stores are a natural complement to Lowe’s strengths in big-box retail, offering smaller-format hardware and garden stores catering to the needs of local customers,” says Lowe’s chairman, president and CEO Robert Niblock. “Strategically, the acquisition will provide us with immediate access to Orchard’s high-density, prime locations in attractive markets in California, where Lowe’s is currently underpenetrated, and will enable us to participate more fully in California’s economic recovery.”
Goldman Sachs is the financial advisor to Lowe’s, and Hunton & Williams LLP is legal advisor.