Handyman to Sell Off All Assets by Year-End
Only 15 months after going public, Handyman Corp., which operates 53 home improvement centers, said Thursday that it would either sell or liquidate its assets by the end of this year.
Handyman officials said the decision was based on the company’s small return on invested capital and the relatively low price of Handyman stock.
“How it will be sold or who will buy it hasn’t been determined,” said Alan Miller, vice president of finance. “We’re exploring various avenues.”
Miller did not rule out the possibility of a leveraged buyout of all or part of the San Diego-based company by current management.
Based on Handyman’s current stock price of $30.625 per share, he said the liquidation value “significantly” exceeds both the $81-million book value and the company’s $78.7-million market value.
If a buyer for all or some of the company’s assets can’t be found, management will simply shut down operations and liquidate before Dec. 31 to take advantage of tax benefits that may expire under the proposed tax reform legislation, according to Miller.
53 Retail Outlets
The company’s 53 retail outlets and 2,500 employees are sprinkled throughout California and Arizona, with 11 stores in San Diego, 7 in Orange County and 1 in Northridge. Miller insisted that increased competition in the do-it-yourself home improvement market was not a factor in the decision to sell or liquidate. In terms of sales, “we’ve done pretty well against the competition,” he said.
However, after-tax profits last year represented only a 3% return on invested capital, below the 10% return earned by competing companies, according to Miller.
Handyman shareholders will vote on the liquidation plan at a special stockholders meeting in late November.
The decision to sell company assets will benefit shareholders, according to Irving Katz, director of research at San Diego Securities. He said a large portion of Handyman earnings--about 50% in the past year--has been generated from the sale of real estate and other assets.
Went Public in 1985
Until it went public in June, 1985, Handyman was a wholly owned subsidiary of Edison Bros. Stores, a St. Louis-based specialty retailer. Edison Bros. shareholders received one share of Handyman stock for every four shares of Edison.
Since then, Handyman closed a store in Oklahoma and another in Texas. For the 52 weeks ended June 28, sales totaled $227.4 million, down 3.3%, while earnings dropped 65% to $5.97 million.
“Comparable (store-to-store) sales have increased pretty well . . . for the last couple of years,” said Miller.
Miller said Handyman’s management wants to complete the transactions by year-end to take advantage of tax benefits due to be phased out under the proposed federal tax reform bill. The new bill will tax a corporation for the excess of its asset liquidation over book value.
In addition, capital gains tax will be eliminated under the proposed bill, making liquidation this year more beneficial to shareholders, Miller said.
The proposed sale will be handled by Shearson Lehman Bros. A Shearson managing director, Peter J. Solomon, is a Handyman board member.
Of Handyman’s six directors, five are or were officers or directors of Edison. The sixth director works for the law firm that represents both Edison and Handyman.
