John Caulfield, Contributing Editor
vol. xi, #1, January 3, 2005

IN THIS ISSUE: • Why Totem sold to Rona • Premdor sold to U.S. investor • CanWel closes Sodisco-Howden purchase • Retailers help tsunami relief • Ace CEO Hodnik to retire April 1 • Home Depot boosts expansion for 2005 • Tim-BR-Marts gets serious with latest hire

* * * * * * NOTE: Dollar amounts are stated in the currency of the country from which the story originates. — Michael McLarney, Editor & Publisher * * * * * *
"The universe is transformation; our life is what our thoughts make it." — Marcus Aurelius, (121-180 AD)"But I am just a pilgrim on this road, boys/ Until I see you, fare thee well." — Steve Earle (American musician, 1955-)
Totem ExteriorCALGARY — Rona's done it again. This time it's added Alberta's top home improvement retailer, Totem Building Supplies, to its growing list of acquisitions.Totem president and major owner Jim Thorogood sold the 16-outlet chain, which dominates the Alberta market, for $100 million. Although the financial aspects of the deal are very favourable for Thorogood, he admits that from an emotional standpoint, "This was a very, very tough deal for me." He refers to the well-run operation he leaves behind — and the 900 people behind that operation.Nonetheless, he found the task of remaining competitive into the future just too daunting. "In this business, you need every cent out of the business just to half keep up with the big guys," Thorogood says. He adds that his company's size, big as it is, makes it even more vulnerable. "We're somewhere between being the little guy that's going to be okay, and a big guy that's not big enough. "It's really the issue of, long-term, how do you compete?" Thorogood will remain in charge of the operation until the Competition Bureau approves the deal, which expected to happen by March, 2005.
SPECIAL REPORT — When Rona announced right before Christmas the acquisition of Calgary-based Totem Building Supplies, it marked the conclusion of a legacy begun with a single store in Calgary in 1970. Now, after Totem president Jim Thorogood carefully rounded up control of the company, and as he approaches retirement age (he's 59), this deal makes good sense for both sides. The $100-million cash deal provides a great succession strategy for Thorogood, who owns 80% of the company, and his son Ryan, who owns 20%.It also adds serious weight to Rona's focus on growing its presence in Western Canada. That mandate has seen it establish a distribution centre in Calgary last spring, tied with active recruitment of independent dealers in the West.The deal also plays well to Bay Street, which is watching Rona's growth with keen interest. (Rona's share price jumped $1.15 on the news of the deal.) The Totem takeover will give Rona added presence in Alberta, where it previously had only 18 stores. With one fell swoop, that number will almost double, and revenue from Totem, which Thorogood says will top $260 million in 2004, will be added to Rona's ledger for that year. In addition, Totem has two other locations under development, one being built in Lloydminister, Alta., and another that's been secured in Okotoks. As with the acquisition of Réno-Dépôt in 2003, the new stores will help Rona boost its presence — and credibility — with contractors. Although pros account for only 25-30% of Totem's sales currently, these sales are an important competitive edge over Home Depot. Like Réno-Dépôt, the Totem stores are expected to operate under their own banner — for now.
TORONTO — Masonite International, one of the largest door suppliers in North America, has agreed to be acquired by the New York-based investment firm Kohlberg Kravis & Roberts, which specializes in leveraged management buyouts. The selling price is $40.20 per share, or around US$3.1 billion.Masonite, which operated under the Premdor name before taking over Masonite in July 2001 from International Paper Co., makes and sells steel and wood doors and windows. It has 75 factories in 16 countries. It employs about 14,000 people and sells its products to customers in over 50 countries. Through nine months ended Sept. 30, 2004, Masonite's sales were up 23.3% to C1.63 billion dollars, and its net income rose 28.2% to C$100.6 million.The company's current management will stay on to run Masonite, and will be required to acquire a 5% stake in the company at the completion of this deal. Masonite reportedly agreed to be acquired to help fund its international expansion, which has been quite active in recent months. Last March, Masonite acquired Stanley Works' door business for $160 million. In May, it announced a deal for Kronodoor, which distributes into Central and Eastern Europe through manufacturing facilities in the Czech Republic and Poland. It also recently paid $25 million to acquire a 50% stake in a subsidiary of Samling Strategic Corp., which makes molded door facings at a factory in Malaysia. Masonite expected to mail a proxy statement relating to this deal to its shareholders of record as of Jan. 17, 2005 by the third week of January, for a meeting that will be held on Feb. 18.
VANCOUVER — Just two days before Christmas, CanWel Building Materials Ltd. confirmed the takeover of all outstanding common shares of Montreal-based Sodisco-Howden Group Inc. CanWel, one of Canada's leading building materials distributors, tendered the takeover bid through its subsidiary, CanWel Acquisition Inc., to buy what amounted to approximately 17.3 million, or 83%, of Sodisco-Howden's total common shares.The deal went through on December 31, when CanWel Acquisition purchased the shares for $3.25 cash per share, which represents a 25% premium over the stock's trading price at the time the deal was announced in early November. CanWel has also extended its bid to 12:00 midnight (EST) on Jan. 11, 2005 to allow any Sodisco-Howden shareholders who have not yet tendered their shares sufficient time to do so.With sales of approximately $542 million in 2003, and 13 distribution centres across Canada, CanWel hopes to broaden its role as a distributor to offer not just building materials and related products, but a full range of hardware. The new acquisition will create a $1 billion company. While Sodisco-Howden has significant LBM distribution in Quebec, for most of the rest of Canada, it supplies hardware. In fact, Sodisco-Howden is the only remaining full-line general hardware wholesaler left in the country that's not owned primarily by its dealers. "This is a significant milestone for this transaction, and for CanWel," said Tom Donaldson, president of CanWel, in a prepared release. "We are excited about closing this transaction on Dec. 31, and look forward to having Sodisco-Howden join the CanWel organization." What's not clear is how CanWel will position Sodisco-Howden alongside its existing business, which already sells LBM to many of Sodisco's top competitors, primarily Rona and Home Hardware, both which are estimated to do at least $100 million apiece with CanWel. Donaldson told Hardlines in an earlier interview that both companies will be run separately, but he couldn't be reached as of press time for further clarification. Watch in future issues as we track how this new distribution powerhouse will sort out its role in the industry.
SPECIAL REPORT — As news of mounting casualties continues to flood the airwaves, retailers across the country are rallying to raise money for relief for victims of the devastating earthquakes and floods in Indonesia last week.St. Jacobs, Ont.-based Home Hardware Stores Limited will donate $250,000 to the relief efforts coordinated by the Red Cross. Dealers across Canada are sending in funds raised at their stores. Sears Canada has pledged $75,000 and is accepting donations, also on behalf of the Canadian Red Cross's Asia Earthquake and Tsunami Relief Fund.Canadian Tire Corp., through its Canadian Tire Foundation for Families, donated $125,000 to the Relief Fund. It's also launched a nation-wide campaign to collect additional relief funds. This is very cool: Martha Billes, controlling shareholder of Canadian Tire Corporation and chair of the Canadian Tire Foundation for Families, and her son Owen Billes, are matching the Foundation's contribution, directing their donation to a variety of agencies providing relief in the region. Wal-Mart Canada announced the launch of Project Tsunami Relief, a nationwide campaign accepting donations through all 242 Wal-Mart stores across Canada. A portion of the money raised will be matched through the company's Local Matching Grant Program.
TORONTO — Home Depot Canada will open 25 stores over the next 14 months, a big jump from the 13-15 outlets it has erected annually over the past three years.The stores, however, will include a number of smaller sized units, and even perhaps another "urban" neighborhood store like the ones that opened in North Vancouver in September 2004 and in Toronto's east end in mid-December. The net increase, in terms of retail square footage, will be about 50% greater than in 2004.The next openings will be an 80,000-sq.ft.-plus store in Calgary North Hills in January, followed by three smaller, 60,000-sq.ft. stores: in Spruce Grove, a community near Edmonton; Chatham, Ont.; and Squamish, B.C.
LONDON — Did Home Depot try and buy the Wickes chain? Focus Wickes, the second-largest DIY retailer in the U.K., was recently split up and the Wickes business was sold to Travis Perkins, a British building materials supplier, for £950 million. The 250-store Focus chain, which is more DIY friendly than the pro-oriented Wickes banner, the country's number-four chain, will remain in the hands of management and a private equity firm.But Home Depot was reportedly on the short list for the auction sale. The world's largest home improvement retailer may have taken a pass at the number-two player in order to leave its options open for Europe's largest DIY retailer, Kingfisher, which operates B&Q and Castorama. However, any past expressions of interest — expressed by Home Depot boss Bob Nardelli himself — have been obviated by the weak U.S. dollar versus the euro.The sale of Wickes to Travis Perkins will add 172 more outlets to TP's own 740-store operation, which, like Wickes, primarily serves trade customers. The sale is conditional upon shareholder approval and government approvals. The deal will give TP a 10% share in the U.K. building materials market. Meanwhile, consolidation continues apace on the world scene. Even as Home Depot keeps busy in North and Central America, it has opened offices in China, in anticipation of announced expansion there. And rumours have been percolating that it might be interested in Australia's largest home improvement retailer, Bunnings.
OAK BROOK, Ill. — Ace Hardware president and CEO David Hodnik has announced his plans to retire from the hardware co-op on April 1, 2005, ending a 33-year career with Ace.Ten of those years were spent as the head of Ace. During that time, the company realized a $1.3 billion increase in its wholesale hardlines sales, to a projected $3.3 billion in 2004. Ace also launched a number of key retail initiatives during that time, including the Helpful Hardware Club customer loyalty program and Discovery category management; the construction of five new state-of-the-art retail support distribution centers totaling some 3.5 million sq.ft.; and implementation of the Vision 21 strategic plan for Ace retailers.Ace's board of directors has selected Ray Griffith, executive vice-president and COO, to replace Hodnik. Griffith, 51, joined Ace in 1994 as director of retail operations for Ace's Western Division. He was named vice-president of retail development and marketing in 1997, vice-president of merchandising in 1998 and executive vice-president, retail in 2000. In April 2004, he was promoted to his current position of executive vp and COO. Prior to joining Ace, Griffith was president of the former hardware cooperative Coast-to-Coast and held managerial positions with Osco Drug.
HALIFAX — AWARD/TIM-BR Mart Atlantic, the LBM buying co-operative serving independent dealers in Atlantic Canada under the TIM-BR Mart banner, has received the CIBC "Spirit of Leadership" Community Award. This prestigious award recognized TIM-BR Mart's community spirit and corporate giving programs through their timbrkids Children's Foundation Inc. As part of the recognition, CIBC Commercial Banking donated $5,000 to the Pregnancy Care Centre in Yarmouth, on behalf of AWARD/TIM-BR Mart.ATLANTA — Home Depot has added heavy appliances to its online shopping catalogue. About 1,800 items will be added on its website to complement the appliance showrooms that first appeared in its stores in 2001. In the third quarter, Home Depot's share of the major appliance market reportedly rose to 8.6%, from 6.2% a year earlier, based on units sold.LONDON — Europe's largest DIY retailer, Kingfisher, had 3Q sales of £1.94 billion, up 8.2% from £1.79 billion from the same period a year earlier. Retail profit increased 6.7% to £190.0 million from £178.1 million. Year-to-date sales were up 9.2% to £5.89 billion, from £5.39 billion in 2003. MISSISSAUGA, Ont. — Torlys Inc., a Canadian manufacturer of hardwood, cork, laminate and linoleum flooring, has signed an agreement with Big Coat Productions of Toronto to be the preferred flooring supplier for "My Parents' House," a new makeover program being produced for HGTV Canada. The focus of My Parents' House is room makeovers for empty-nester parents done with professional design help by adult children who have moved away. The program is hosted by two designers, New Brunswick-born Emmanuel Belliveau and Andrika Lawren of Toronto. OSHAWA, Ont. — Just before Christmas, Sears Canada Inc. opened Sears Appliances & Mattresses stores in Oshawa and Burlington, Ont., followed by the opening of a Sears Home store in Red Deer, Alta. ATLANTA — Home Depot is reorganizing its store divisions, following similar moves last year. While the Western Division will remain intact, both the Central and East Divisions are being divided into North and South, in an effort to create further efficiencies, says the company. Last year, Home Depot rolled its Northwest Division into its West division. VANCOUVER — West Fraser Timber Co. Ltd. received the go-ahead from the Canadian Competition Bureau on Dec. 17, 2004 to complete its acquisition of Weldwood of Canada from International Paper Co. The deal closed on December 31, 2004. One of the outstanding issues related to the sale was the price, which ended up being lowered by $30 million.
Calgary-based Tim-BR-Marts Ltd. has hired Steve Stremecki as director of business development for Ontario and Western Canada. Steve comes over from BPB Westroc, where he served for many years, including as vice-president of marketing — North America. Most recently he managed the U.S. Division for Kenroc in Minneapolis. Stremecki will move to Calgary and he commences his duties on Jan. 10.Malcolm Orr has joined IKO Industries as Ontario sales manager. A 20-year veteran of Duchesne et Fils ltée, he is now be responsible for all of IKO's Ontario sales representatives, and is involved in the customer service department. He reports directly to Art Stanfield, director of sales — Eastern Canada.Tom Taylor, 38, has been appointed to the newly-created position of executive vice-president — Home Depot Stores. The post gives him responsibility for execution across all of the company's U.S. and Mexico stores. Taylor has been with Home Depot for 21 years, and since February 2003, he has been division president of the Eastern Division. At Do it Best Corp., Timothy Miller has been promoted to the position of retail marketing manager, where he's responsible for the group's retail marketing division, which includes all advertising programs. Miller also oversees the co-op's advertising and graphics management teams and manages the overall branding strategies for 6,000 private label products. Miller joined Do it Best in 1993, and served most recently as retail logistics manager. Sears Canada Inc. has appointed David Merkley as interim CFO, effective Jan. 1, until a permanent CFO is appointed. In his current role as vice-president and corporate comptroller, Merkley has worked for a number of years with retiring CFO John Butcher.
Housing starts in the U.S. suffered a whopping drop in November, says the Commerce Department, the biggest since January 2004. Starts on new homes and apartments were down 13.2% to a seasonally adjusted annual rate of 1.77 million from a 2.04 million pace in October. Construction intentions, as measured by building permits, were down 1.5% in November to an annual rate of 1.99 million.
Wholesale sales rose by 0.2% in October, after tumbling 1.8% in September, reports Stats Canada. Wholesalers sold goods and services worth $37.7 billion in October. The weakness in wholesale sales in the past two months coincided with the slowing down of international trade and the manufacturing sector. The wholesale building materials category's sales were up 2.7%, one of only two sectors to show an increase.
"There's nothing wrong with retirement, as long as it doesn't interfere with one's work." — Les Groves, aka "Mr. Hardware," former vice-president of sales and marketing for Stanley Canada, Fellow of the Door and Hardware Institute, and former columnist for Hardware Merchandising, enters 2005 celebrating his 70th year in the hardware industry. Congratulations, Les!

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This well-established home improvements company has built their success on top quality service for window, door and siding products and recently added the Owens-Corning basement finishing system to their portfolio. Business growth requires the addition of a Marketing Manager to complement their existing management team. Reporting to the President, he/she will operate and manage all marketing staff and programs to obtain leads for their inside and outside sales forces. Consumer marketing areas include marketing collateral development, direct mail programs, media buys, referral programs development, community relations, trade show involvement and market trend analysis. Currently a US-based Manager, others would typify you as the “lead generation guru” in a home improvement firm that knows how to get the most out of your staff. Open and forthright, you’re good at developing two-way communication channels throughout your company and managing by example. Home improvement company experience is essential. Located in central Pennsylvania with Baltimore, Washington and Philadelphia all in relative proximity, Harrisburg is a family-friendly community that recently ranked as America’s #2 least-stressful city. To inquire further about this opportunity, please contact Wolf Gugler in strict confidence, quoting Direct Marketing Manager-PA. Wolf Gugler & Associates Limited, 1000 West Wilshire, Oklahoma City, OK 73116. (405) 848-3006 email: Web site:



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