Lowe’s Acquires Home Improvement Chain Orchard Supply

Lowe’s Companies Inc. (NYSE: LOW) said this morning that it has concluded an asset purchase agreement to acquire the majority of the assets of Orchard Supply Hardware Stores Corp. (NASDAQ: OSH) for $205 million plus the “assumption of payables owed to nearly all of Orchard’s supplier partners.” Orchard Supply is based in San Jose, Calif., and operates 91 neighborhood hardware and garden stores primarily in large metropolitan areas in that state.

Orchard Supply came public in January 2012, as a spin-off from Sears Holdings Corp. (NASDAQ: SHLD). The initial public offering price was $25 a share and shares closed on Friday at $1.88. The company has about 6.03 million shares outstanding. Accounts payable at the end of February totaled $39.66 million, and Orchard had $262.31 million in short/current long-term debt. The company’s long-term debt totaled $46.95 million.

Last week, Orchard’s largest shareholder, Fairholme Capital, sold its entire 12.5% stake in the company, and there was a report that it had hired a firm to assist with a prepackaged bankruptcy plan. Lowe’s saved the day, but the cost to Orchard’s shareholders has been steep.

Shares of Orchard Supply are up 11.7%, at $2.10 in a 52-week range of $1.85 to $20.41. Shares of Lowe’s are up about 1.1%, at $41.63 in a 52-week range of $24.76 to $43.84.

By Paul Ausick