Lowe's begins search for Canadian vendors

TORONTO—Line reviews began about six weeks ago at Lowe's new corporate headquarters and customer support centre in Toronto's north end. The process is being led by Ben Mauceri, vice-president merchandising. He was one of the few people at head office who, like Robinson himself, were brought up from Lowe's headquarters in Mooresville, N.C. The rest of the merchandising team, which comprises sixteen buyers and four division directors, was recruited from some of Canada's top retailers, including Canadian Tire and Wal-Mart. According to Doug Robinson, president of Lowe's Canada, this team has a mandate to "find the best values and best brands" for Canadian consumers. While many U.S. companies — already supplying Lowe's in the U.S. — will see their products appear on Canadian shelves, domestic suppliers are being sought, as well. "We will rely on U.S. vendors," said Robinson, "but Ben's team will look for the best products and values for Canada." One area in which Lowe's expects to duplicate its U.S. successes is large appliances. In the U.S., Lowe's is the number-two seller of washing machines, dryers and refrigerators. Second only to Sears, and gaining fast, it managed to secure $4.3 billion in sales from appliances last year. (By comparison, Home Depot, since it began selling appliances in 1994, has grown those sales to $1.8 billion.) Lowe's will use Assured Logistics, a subsidiary of Progistix-Solutions Inc., which is in turn owned by Canada Post, to handle its distribution needs in this country. "We can then continue to focus on the retail side," said Robinson. Lowe's efforts to expand internationally may be coming just in time. In a meeting with investors recently, the company lowered its forecasts again for the year-end, citing a drop in U.S. housing and in consumer spending. The Canadian launch is expected to have an impact on results this year, due to start-up costs, but stores are expected to be profitable within the first year — in keeping with U.S. store performance metrics.

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TruServ to convert to corporate structure

WINNIPEG—TruServ Canada member dealers voted last week to accept a resolution by its board of directors to convert their organization from a member-owned co-operative to a corporate structure. The vote was passed almost unanimously by the voting members in attendance at its latest fall market — 134 in favour, none opposed, and only one abstaining. The preferred shares will be owned entirely by the membership, à la Home Hardware, and not traded publicly. The board spent the better part of the past year analyzing the potential change, and the past several months have been spent communicating the value of the proposed incorporation with the members. In fact, during dinner at the market on the evening before the vote, the TruServ board made a final plea to the members. "I want to stress the importance of moving forward. To do that, we must change," said Pierre Levesque, chairman of the board and himself a dealer. "We believe we face a tremendous opportunity," added Bill Morrison, TruServ's president and CEO. According to Morrison, the co-op model is no longer refined enough to enable TruServ to keep up with the tremendous changes taking place in the industry. A co-op cannot retain earnings. It must turn them back to members or otherwise reinvest in operations. And any decisions must have consensus from the entire membership. The board was inspired by Home Hardware's success under a dealer-owned corporate structure, and galvanized by the success of RONA to go corporate in 2003. TruServ's conversion will be along the lines of Home Hardware, however, and not RONA, as all shares in the new TruServ corporation will be owned by the dealers; none will be floated publicly. The new structure, says Morrison, opens up an array of possibilities for TruServ. It will enable the organization to retain earnings, building equity for future investments, consider acquisitions of its own, and generally be better positioned to take advantage of the consolidation in the industry. With this new structure, says Morrison, TruServ will be better able to forge stronger relationships with other groups. "We have the opportunity to change and really adopt new thinking, inviting other companies to think more strategically." TruServ is already a supplier to key buying groups such as Castle and TIM-BR MART, and, of course, it is closely allied with CanWel, Hardware Division (formerly Sodisco-Howden), through its partnership in Pro Retail Services. Morrison expects TruServ to be better able to tighten those relationships, as well as others in non-traditional channels such as grocery and pharmacy.

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CanWel announces purchase of five PTW plants

VANCOUVER—In an effort to increase its consolidation of the LBM market, CanWel Building Materials Income Fund, through its subsidiary CanWel Holding Partnership LP, is buying five pressure-treated wood facilities across Canada. The deal is valued at approximately $21 million. The plants are owned by CanWel's majority unit holder, Amar Doman. As a result of Doman's financial interest in the transaction, he has abstained from voting on this transaction and the trustees of the Fund have set up a special committee to review the transaction, manage the acquisition, and provide recommendations to the full board of trustees. The mills are CanadaWestern Pacific Wood Preservers Ltd., Western Cleanwood Preservers Ltd., Alberta Wood Preservers Ltd., Eastern Wood Preservers Ltd., and Quebec Wood Preservers Ltd. The five plants are located at or near Surrey, B.C., Edmonton, Toronto, and Montreal. They have already been CanWel suppliers for many years and represent another step in the wholesaler's efforts to integrate vertically, as well as consolidate horizontally. Following the acquisition, CanWel's assets will comprise the five treating plants and 17 distribution centres located across Canada. "The acquisition provides us with an integrated capability in treated lumber that is expected to enhance our profitability and growth strategies, as CanWel is currently the largest customer of the plants," says Tom Donaldson, president and CEO of CanWel. "By vertically integrating these operations, CanWel reinforces its position within the pressure-treated arena."

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HD Supply completes acquisition of Burrus Contractors Supply

ATLANTA—As it keeps buying up companies, Home Depot's wholesale supply business has decided to re-brand itself as "HD Supply", a move that affects operations both in the U.S. and in Canada. And with the new name comes an updated website: www.hdsupplyinc.com, that maps out the many divisions within Home Depot Supply. Hot on the heels of the new name, HD Supply has acquired, through its White Cap Construction business, Burrus Contractors Supply, a distributor of concrete accessories, forming systems and fabricated rebar. Established in 1928, Burrus Contractors Supply operates in three locations in Texas and one in Louisiana. Terms of the deal, which is expected to close before the end of the year, were not disclosed. With nearly 1,000 locations and more than 26,000 associates, HD Supply is fast becoming one of the largest diversified wholesale distributors in North America.

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Lowe's sets debt sale price

MOORESVILLE, N.C.—Lowe's has revealed pricing details about its planned sale of $1 billion in new debt, the proceeds of which would be used for "general corporate purposes" that include capital expenditures and buying back common stock. The retailer will sell $550 million of 5.4% notes, due 2016; and $450 million of 5.8% notes, due 2036. It expects to close these sales on October 10. Merrill Lynch, Bank of America Securities and Wachovia Securities are managing these transactions.

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GE sells Advanced Materials Business to Apollo

Fairfield, Conn.—GE has signed a definitive agreement to sell its GE Advanced Materials business to Apollo Management L.P., a private investment firm. The deal is valued at approximately $3.8 billion in cash and securities. Upon completion of the transaction, GE will receive a 10% ownership stake in the new company and hold $400 million of notes. The closing of the transaction is subject to customary conditions, including the receipt of regulatory approvals, and is expected to occur before the end of 2006. GE Advanced Materials is a $2.5 billion supplier of silicone-based products, silanes, sealants, urethane additives and adhesives; and high-purity fused quartz and ceramics materials. It is headquartered in Wilton, Conn., and employs 5,000 people in 38 locations worldwide. GE Advanced Materials has two major joint ventures: GE Toshiba Silicones and GE Bayer Silicones. GE has reached definitive agreements with both Toshiba and Bayer to acquire 100% of their respective joint-venture equity stakes. Those companies will become wholly owned by GE and will be included in the Apollo acquisition.

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