Thrifty Payless Executive Replaced 7 Months After Firm Leaves L.A. : Merger: Chairman of Bi-Mart stores unit will lead company. Sources said former CEO did not consult sufficiently with board.
The chief executive whose preference for Oregon over Los Angeles was cited as a major reason that Thrifty Drug transferred its headquarters and hundreds of jobs out of the city seven months ago has been replaced in an apparent clash with the board of directors.
Tim McAlear, who headed the recently merged Thrifty and PayLess drug store chains, left the company because “the board of directors believed that a change of leadership was appropriate,” a spokeswoman said.
Thrifty PayLess Inc., now headquartered in Wilsonville, Ore., would not elaborate. But McAlear’s abrupt departure raised questions about efforts to meld the two drug store chains, whose merger took effect in April.
“It was a clash of business cultures,” said one source, adding that McAlear didn’t consult sufficiently with the board. “McAlear’s management approach rubbed board members the wrong way.”
McAlear was replaced by Marty Smith, chairman of the merged company’s Bi-Mart stores division. Smith has also become chairman of the company.
The merger occurred after Kmart Corp., parent company of PayLess, agreed last December to sell the chain to Thrifty for $1.2 billion. The deal was engineered by Leonard Green & Partners, a Los Angeles-based investment firm that controlled Thrifty.
Leonard Green was chairman of the merged firm’s board of directors during McAlear’s tenure. Green has relinquished the chairman’s title to Smith, but remains on the board of the company, which has about 1,100 stores in 11 Western states.
McAlear and Green were not immediately available for comment. However, Jonathan Sokoloff, a principle at Leonard Green & Partners, said the changes were unrelated to the financial performance of Thrifty PayLess.
For the three months ended Oct. 2, the privately held Thrifty PayLess reported a 3.3% increase in revenue from stores open at least 12 months.
McAlear was a 30-year veteran of Kmart who joined PayLess in 1987. He is credited with improving pharmacy operations at PayLess, and his selection to run the merged firm was considered testimony to the stronger management talent at PayLess than at Thrifty.
However, his sudden departure is in keeping with a history of rapid management turnover that has plagued Thrifty, both before and after the merger with PayLess. Two executive vice presidents also left the firm late last summer.
Ironically, Leonard Green & Partners decided to close Thrifty’s headquarters on Wilshire Boulevard and consolidate its main offices in Wilsonville partly because McAlear and his team operated PayLess headquarters in that city and wanted to stay there.
Before the merger, Thrifty had about 500 employees at its headquarters at 3424 Wilshire Blvd. There are now about 250 employees remaining at that location, the site of some accounting, legal and data processing operations. The company plans to close down all operations at that site by the end of 1995.
McAlear’s role in establishing an Oregon headquarters for the merged company was the focus of friction between Green and Mayor Richard Riordan earlier this year. Riordan told reporters last March that Thrifty would be moving its headquarters to Wilsonville to accommodate McAlear.
At the time, Green maintained that they had made no decision on a headquarters site. One month later, Green announced the move to Oregon and claimed that Riordan did little to try and keep the company in Los Angeles.
