Wickes to Divest Four Operations : Will Use Funds to Make Big Acquisition, Chairman Says
In a major shift of direction, Wickes Cos. announced Thursday that it is leaving the general retailing business and will divest four of its retail operations. The company said it will use funds from the sale of those units, along with $500 million from a new debt offering, to accumulate a “war chest” to make a major acquisition soon.
Sanford C. Sigoloff, Wickes chairman and chief executive, said the company was restructuring to concentrate on three business segments: lumber and home furnishings, including Wickes Lumber, Builders Emporium and Wickes Furniture; automotive parts, and Kayser-Roth, a maker of brand-name apparel and hosiery.
Wickes emerged from three years of financial reorganization last year after filing for protection under Chapter 11 of the U.S. Bankruptcy Code in 1982. Under its latest restructuring, the company will shed all but the lumber and home-furnishing segments of its pre-Chapter 11 businesses.
The move also provides the first look at Wickes’ strategy for integrating the consumer and industrial products group of Gulf & Western Industries, which it acquired in September for $1 billion cash.
Wickes said it plans to sell:
- Woman’s World, a San Diego-based chain of 210 clothing stores for large-size women.
- Mode O’Day, a Burbank-based franchised women’s apparel chain.
- Howard Brand Discount Stores, a Monroe, La., chain of 88 general merchandise discount stores located in the Southern and Southeastern United States.
- Simmons USA and Simmons International, which manufacture mattresses in the United States, Canada, Europe, Latin America, Japan and Australia.
The four units had 1985 sales of about $700 million, but only six months of Simmons’ results are included because it was acquired in the fall of 1985. Wickes expects to net about $200 million from the sale of the units.
Wickes had previously disclosed plans to sell its Red Owl Stores, Synder Drug Stores and Western Diversified Services, which together accounted for $900 million in sales.
It expects to net $100 million from their divestitures.
The sales will reduce the number of Wickes employees from 70,000 to 50,000. In addition, annual sales will drop to about $4 billion from nearly $6 billion, the level prior to the various divestitures.
Meanwhile, Wickes reported results for its first full year of operation since emerging from bankruptcy reorganization.
For the year ended Jan. 25, Wickes reported net sales of $2.8 billion, compared to $1.6 billion the year before. Income from continuing operations was $28.1 million, up from $924,000. Net income was $76.1 million after extraordinary items, compared to $296.5 million the year before.
The company said the difference in earnings reflects a $263.3-million gain for the year ended Jan. 26, 1985, from the completion of its Chapter 11 reorganization.
The results include revenue for the acquired G&W; business for only six months and exclude operations that will be discontinued.
The year-ago figures are not fully comparable because they do not include any G&W; results.
The sale of the seven units, which Sigoloff said were all profitable, will give Wickes $300 million in new funds. In addition, it plans to sell at least $500 million in senior subordinated debentures.
Analysts say the company has an additional $200 million that is internally generated for a total of $1 billion to finance acquisitions.
Sigoloff said that Wickes is interested in a major acquisition, but he declined to be specific except to say: “Raising this kind of money is not for a regional acquisition. The pattern is not unlike what we did almost the same time last year,” when Wickes raised $1 billion to acquire the G&W; businesses.
Those operations had 1984 sales of $2.8 billion and operating income of more than $200 million.
“The first time we raised the money with the criteria that it would be a friendly acquisition,” Sigoloff said. This time, however, Wickes might take the role of a “white knight” or “be more aggressive or selective,” he said. “We’d prefer not be to be involved in unfriendly things, but it depends on how determined we are.”
WICKES’ STRING OF DIVESTITURES
For fiscal year ended Jan. 25, 1986
DISCONTINUED OPERATIONS Divestiture announced Thursday:
Simmons USA
Simmons International
Woman’s World
Howard Brand Discount Stores
Mode O’Day
Total sales: $700 million 16% Divestiture announced Jan 21.: Red Owl Stores
Snyder Drug Stores
Western Diversified Services
Total sales: $900 million 16% CONTINUING OPERATIONS Builders Emporium
Wickes Furniture
Wickes Lumber
Sequoia Supply
Wickes plc (Europe)
Leath Furniture
Total sales: $2.8 billion* 64%
* Sales include six-month results from companies acquired last year from Gulf+Western Industries, including Simmons Universal, Kayser-Roth, Kayser-Roth Hosiery, Wickes Manufacturing Cos. and several auto replacement parts and accessories firms. If Wickes had owned those companies for a full year, its sales from continuing operations would have totaled about $4 billion.
