Firm buys 70% stake in Bob's
By Clint Engel -- Furniture Today, February 6, 2005
Manchester, Conn. — A Connecticut-based equity firm has purchased a majority stake in Bob's Discount Furniture here, infusing the company with the capital and expertise it needs to grow beyond New England.
Private equity firm Saunders Karp & Megrue of Stamford, Conn., acquired a 70% stake in the 19-store Top 100 chain for an undisclosed amount. Bob's management has not changed and retains a stake in the company, although as part of the deal, Dick Lesser — a friend of SKM — and two SKM executives have joined Bob's board.
"I've never been more excited about the future of the company," said Bob Kaufman, president and namesake of the retailer, which did more than $250 million in sales last year.
Kaufman noted that Lesser was instrumental in the success of T.J. Maxx and its parent TJX Companies, where he's also a board member, and other multi-store retailers.
SKM, meanwhile, has had a stake in more than 7,000 retail locations, Kaufman said, and has a history of taking private companies public.
"One of the things they will do is get us beyond our core New England penetration," he said. He would not say exactly where outside New England the company plans to open new stores, but said Bob's Norwich, Conn., distribution center has the ability to serve markets within a 250-mile radius, including New York City and Long Island.
What's more, the retailer recently received government approval to expand the distribution center by 214,000 square feet to 581,000 square feet.
"We'll leverage that as we go forward," Kaufman said.
Bob's will open two to four of its promotional to mid-priced stores this year, including a 32,000-square-foot unit in Natick, Mass., in April, its ninth store in greater Boston. While the number of new stores planned this year hasn't changed as a result of the acquisition, the "geographical targets have opened up," he said.
"We have a great footprint in Connecticut and ... the Boston area," said Sean Britain, a vice president with Saunders Karp & Megrue, a point man in the Bob's deal and one of the retailer's new board members. "The view is to look at contiguous markets throughout New York and New England that we're not in."
Britain emphasized the expansion will be methodical and contiguous, that there are no plans to "leap down to Delaware." Philadelphia also isn't in the immediate plans.
Neither Bob's nor SKM would project sales for the retailer this year or going forward.
Kaufman and company Chairman Gene Rosenberg founded Bob's in 1991. They later were joined by CEO Stan Adelstein and Joe Goodman, executive vice president of finance and operations. The retailer quickly climbed the ranks of Furniture/Today's Top 100, reaching No. 34 last year with 2003 sales of $205 million, up 25% from the year before.
Since late in 2003, the company has opened four stores — in Worcester, Mass., Manchester, N.H., South Portland, Maine, and Southington, Conn. All but the 36,000-square-foot Manchester store are over 55,000 square feet. The Southington store replaced three small Connecticut stores that subsequently closed.
"We are delighted with our newly formed partnership with Bob's Discount Furniture," said SKM partner John Megrue, who also is joining Bob's board. "Gene, Bob, Stan and Joe have built a differentiated retail concept and a great management team. Bob's has demonstrated a consistent record of impressive growth and financial performance. We look forward to working with the company to continue their rapid expansion."
Saunders Karp & Megrue manages more than $1.5 billion through three private equity funds, and said in a press release that Bob's is its "17th platform investment in the retail industry." Others have included Dollar Tree, The Children's Place, Charlotte Russe Holding and Hibbett Sporting Goods. All four were private companies when SKM acquired them and eventually went public.
Asked if a stock offering was in the future for Bob's, Britain said going public is "one of many exit alternatives we consider for any new investment, and we'd do the same here."
SKM has agreed to continue the retailer's charitable endeavors, which includes giving its local communities about $1 million a year through its charitable foundation and the stores.
"They are leaving that intact," Kaufman said. "It was a very important part of the deal."
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