W. R. Grace & Co. said Wednesday that it intends to sell the bulk of its retail business for about $500 million to a group led by Harold S. Geneen, former chairman of ITT, and David J. Mahoney, former chairman of Norton Simon Inc.
A Grace spokesman said the company expects to sign a contract with the investor group, GMR Corp., in the next two weeks. The transaction should close shortly after that, he said.
Grace revealed last December that it planned to sell the retail division as the first step in a restructuring that would allow the company to concentrate on other businesses, particularly specialty chemicals. Grace also has energy businesses and operates several restaurant chains.
Proceeds from the sale would be used to reduce the debt that Grace took on when it recently paid $596 million for a 13.6-million-share block, or 26%, of its own stock.
70 Stores in California
GMR will be buying 317 home centers that operate under such names as Handy Dan, Handy City, Channel and Angels. The company has about 70 stores in California, which are called Ole’s in the south and Orchard Supply Hardware in the north.
Grace’s retailing group also includes 376 specialty stores such as Sheplers, which sells western and leisure apparel, and J. B. Robinson Jewelers.
Grace already has agreed to sell its 56% stake in Herman’s Sporting Goods to Dee Corp. PLC, a leading British food retailer, for $227 million.
The Grace spokesman said the company is selling the retailing group at a profit but declined to reveal the division’s book value. In 1985, the retail business, not including Herman’s Sporting Goods, had after-tax operating income of $11.7 million on sales of $2.07 billion.
The investor group buying Grace’s retail division represents an unusual combination of high-profile former executives of major companies.
Geneen, 76, has been credited with inventing the multinational conglomerate. He joined ITT as president in 1959 and built it into one of the world’s largest conglomerates before retiring from management in 1980. He left ITT’s board in 1983.
Geneen has become a major investor in several companies, including Los Angeles-based Ticor, of which he is chairman.
Mahoney resigned from Norton Simon Inc. in mid-1983 just before the company was purchased by Esmark. A Mahoney-led group had triggered a brief bidding war for Norton Simon by offering to take the company private.
Mahoney, who developed a reputation as a tough boss as well as a marketing and advertising wizard, was criticized when he left Norton Simon for emphasizing short-term earnings gains and making untimely acquisitions during his 14-year tenure.
The group also includes New York investment banker Michael Rosenthal, a former director at Donaldson, Lufkin & Jenrette Securities. Rosenthal has said that the group bid on the retail business because it is interested in running the stores, not in obtaining real estate to resell.
GMR was one of more than 100 interested parties that approached Grace to buy all or part of the retail group, the Grace spokesman said.
He said the company is considering allowing part of its restaurant business to be taken private through a leveraged buy-out--"if you use in capital letters ‘considering.’ ”
The spokesman said Grace hasn’t yet decided what part of the business would be included.