Grace Changes Plan, Will Sell Stores to Management

W. R. Grace & Co., unable to consummate the sale of its 460 retail stores to an investor group headed by high-profile executives Harold S. Geneen and David J. Mahoney, said Wednesday that it is selling the stores to one of its executives.

A spokesman for New York-based Grace confirmed late Wednesday that Bernard Kossar, senior vice president of the retail group, is heading an investor group that includes other unidentified Grace management members, Citicorp Capital Investors Ltd. and Drexel Burnham Lambert. He said the deal was a leveraged buyout, in which investors borrow against the assets of the company to make the purchase.

Pulling Out of Retailing

Grace, which announced last December that it would pull out of retailing as part of a corporate restructuring, is selling Channel Home Centers; its central region homes centers, which include Handy Dan and Dandy City; Home Quarters Warehouse; J. B. Robinson Jewelers Inc.; Bermans, a leather goods chain, and Sheplers, which sells Western wear.

The Grace spokesman said the Kossar group will pay an undisclosed amount of cash.

Industry sources estimated the value of the deal at more than $300 million.

Grace had disclosed plans early last month to sell the bulk of its retail group for about $500 million to GMR Corp., a company organized by Geneen, former chairman of ITT, and Mahoney, former chairman of Norton Simon Inc. GMR officials could not be reached for comment.

Sold 109 Stores to Wickes

The first sign that the Geneen-Mahoney deal was not going well was when Grace agreed earlier this month to sell 109 home building materials stores located in the West to Wickes Cos. of Santa Monica.

Those stores, which included the Ole’s Home Improvement chain and Orchard Supply Hardware, were to have been sold to GMR.

Although a price was not disclosed on the deal, Wickes officials said that industry estimates of $180 million are “in the ballpark.” Grace said it expects to complete both the Kossar and Wickes sales in the second quarter.

Kossar, 54, joined Grace in 1983. He has 20 years of retailing experience. Most recently he had been a consultant to Great Atlantic & Pacific Tea Co., and he had previously been president of Vornado Inc., a Garfield, N.J.-based company.