Shareholders Likely to OK Closure at Handyman
The “60% off” sale signs posted in San Diego-based Handyman home improvement stores probably will be replaced with “store closed” signs after a special shareholders meeting Thursday in St. Louis.
Shareholders are expected to approve a board of directors proposal to liquidate the company, a move that would boost the value of Handyman shares to an estimated $47.11. Just three months ago, the stock traded at $22 a share.
Board members proposed the liquidation--to be completed by year’s end to qualify for favorable tax treatments--because Handyman, although profitable, could not keep pace with “significant changes” in the fiercely competitive home improvement store industry.
Despite a $17.3-million store modernization program, increased competition “negatively influenced the performance of existing stores,” according to a Handyman proxy mailed to shareholders late last month.
Handyman considered boosting its market presence by acquiring additional stores, but “the prices asked for desirable locations would have resulted . . . in a poor return on investment,” according to the proxy.
Rather than continue the fight against better-endowed competitors, Handyman board members in September determined that shareholders would be better served by liquidation.
The asset sale will generate $224 million in gross revenue, and shareholders, according to the proxy, will realize a $121.5-million--or $47.11 per share--profit.
The liquidation plan calls for the creation of a “liquidating trust” that will oversee the asset sale. The trust also will ensure that shareholders will benefit from favorable tax law provisions that will be eliminated Jan. 1 because of the federal tax overhaul.
Some of Handyman’s stores probably will remain open after the board meeting, however.
Handyman Vice President Steven M. Babin and retired Vice President Norman Fox evidently are continuing to negotiate to purchase some Handyman stores. Fox and Handyman declined to comment Monday on those talks.
Handyman President Harvey W. Rosen’s bid to purchase several stores was dashed when he was unable to obtain financing, according to the proxy.
Handyman’s storefronts and leases are being acquired by competitors and other types of retail operations. For example, in late November, Handyman sold seven of its Northern California retail stores to Circuit City. The appliance and electronics store chain also was negotiating to acquire three other Handyman locations.
Although Handyman will cease to exist as a public company if shareholders approve the liquidation Thursday, it could take as long as three years for the asset sale to be completed.
Handyman, which operates 53 retail stores, four distribution centers and a San Diego executive office, became a public company in June, 1985. Before making its initial public offering, Handyman was a wholly owned subsidiary of Edison Brothers, a St. Louis-based retail company. Its first store opened in 1962.
