True Value, the wholesale hardware supplier chain, has filed for Chapter 11 bankruptcy and has plans to sell its assets to its rival Do It Best at the end of 2024. The iconic hardware supplier has been selling tools, lumber, plumbing, hardware, heating supplies, and other home improvement goods for almost 75 years.
The Chicago-based company reported between $500 million and $1 billion in total liabilities, according to its Oct. 14 Chapter 11 filing in a Delaware U.S Bankruptcy Court, Reuters reported.
True Value, founded in 1948, said it will continue providing its independently owned 4,500 retail stores with products, as they are not part of the bankruptcy. The company exists as a member-owned wholesaler cooperative that primarily sells its products to hardware sellers, garden centers, industrial distributors, and other merchants, according to S&P Capital IQ.
Despite total retail sales of $10 billion, True Value has been facing losses due to a struggling economy, worsened by rising costs caused by inflation and higher interest rates.
Do It Best has agreed to act as a "stalking horse" bidder for True Value's assets, which means that its Chicago-based rival will still remain open to higher bids.
"After a thorough evaluation of strategic alternatives, we determined that the sale of our business was the path forward to maximize value and best serve our retail partners and other stakeholders into the future," said True Value CEO Chris Kempa.
"We believe that entering the process with an agreed offer from Do it Best, who has a similar decades-long history in the home improvement space and also operates with a focus on supporting members and helping them grow, is the most beneficial next step for True Value and our associates, customers, and vendor partners," Kempa added.
The collapse of the housing market due to high mortgage rates has reduced the need for lumber and building materials.
This has led to a slump in new homeowners' purchases of new furniture, such as beds, couches, tables, chairs, and hardware.
Home Depot and Lowe’s have struggled to adjust to the economic slowdown, as big-box retailers like Target and Walmart attract cash-strapped consumers looking for less expensive deals.
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In addition to paying $153 million for True Value in cash, Do It Best will take on about $45 million in contracts and other obligations and retain some existing employees.
Home furnishing companies like Big Lots and LL Flooring also filed for bankruptcy in September as sales nosedived.
Corporate bankruptcies have surged 20 percent from 2023 to 2024, and according to data provider Epiq AACER, over 22,550 businesses are now seeking protection from creditors.
Dan Starr, the CEO of Do it Best, called the supplier's acquisition of True Value a strategic milestone. "A successful acquisition of True Value assets would represent a strategic milestone for Do it Best and home improvement retailers around the world," said Starr.
"Do it Best has a proven track record of driving profitability through the most efficient operations in the industry. This acquisition, if consummated, would provide True Value and independent hardware stores the strongest opportunities for growth for years to come," he continued.
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