Napa’s Orchard Supply Hardware store, whose parent company has filed for Chapter 11 bankruptcy, is about to get a new owner.

Lowe’s, a much larger home improvement chain, has made an acquisition offer for Orchard Supply Hardware stores for about $205 million in cash, according to The Associated Press.

Orchard Supply filed a voluntary Chapter 11 bankruptcy petition on Monday, so the offer from Lowe’s will become the “stalking horse” bid for an auction of Orchard’s assets, the AP reported. Such a bid sets the floor for an auction process that lets competitors make better offers.

Mooresville, N.C.-based Lowe’s Companies Inc. said Monday it will acquire at least 60 of Orchard’s 91 stores, and alternative bids must top Lowe’s offer by at least $12 million. Lowe’s also will assume responsibility for money owed to nearly all of Orchard’s suppliers.

On Monday afternoon, Mike Caswell, manager of Napa’s Orchard Supply Hardware, referred calls to corporate spokesperson Leigh Parrish.

“There is a review of stores that is ongoing at this time,” said Parrish, but “it’s premature to speculate about the number of stores and which locations” will be acquired by Lowe’s.

“The 60 is a minimum number and Lowe’s could chose to acquire more,” Parrish said. That will be determined during the bankruptcy and sale process.

“We fully expect to continue operating our stores and our overall business as usual during the restructuring process and to have our own brand, leadership and strategy at the completion of the sale process,” said a statement from Mark Baker, president and chief executive officer at Orchard Supply Hardware.

“The situation will unfold over time and we really don’t know how it’s going to affect the property at this point,” said Wendy Whitson, attorney for Monroe Forsyth Properties, the entity that owns the Orchard Supply Hardware and World Market buildings in Bel Aire Plaza.

Craig Semmelmeyer of Main Street Properties manages the rest of the shopping center. He predicted business as usual for the store during the transition.

“I’m sure Lowe’s is thrilled to get into the Napa market,” Semmelmeyer said. “I would say this is probably one of the top Orchard Supply stores in the Bay Area in terms of volume.”

Nearby Justin-Siena High School had previously announced it planned to lease part of its north campus to a Lowe’s, but in October the school said that it had ended those plans. Justin-Siena originally hoped to lease 10 acres facing Solano Avenue to Lowe’s, using the revenue to fund campus improvements and continuing offering tuition assistance. The project had triggered opposition from nearby residents who feared traffic and other impacts.

The closest other Lowe’s are in Vallejo and Fairfield.

The California market has been strong for home improvement retailers recently, the AP reported. In its most recent earnings report Lowe’s said net income rose 3 percent but missed expectations, hurt by a rainy and cool spring. However its larger rival Home Depot Inc., with a bigger presence in California, reported better-than-expected results.

“This transaction is about the convenience deficit that Lowe’s currently has relative to Home Depot in key metro markets around the U.S.,” said Janney Capital Markets analyst David Strasser. “This acquisition would help immediately in California, and possibly set up a strategy for other key metro markets.”

The Lowe’s bid must survive the auction and receive bankruptcy court approval. The companies expect the deal to close in about three months, the AP reported.

Orchard Supply filed its bankruptcy petition in the U.S. Bankruptcy Court for the District of Delaware, the AP reported.

Orchard stores are smaller than Lowe’s locations, with about 36,000 square feet of selling space compared with 113,000 square feet for Lowe’s, the AP reported. The San Jose company was spun off from Sears Holdings Corp. in January 2012, and most of its locations are in densely populated California markets.

Lowe’s already runs 110 stores in California. It plans to have Orchard operate as a separate, standalone business, retaining the Orchard brand.

Lowe’s Chairman and CEO Robert A. Niblock said in a statement that Orchard’s business has potential but also has been burdened with high debt.

“Strategically, the acquisition will provide us with immediate access to Orchard’s high density, prime locations in attractive markets in California, where Lowe’s is currently underpenetrated, and will enable us to participate more fully in California’s economic recovery,” Niblock said.

Lowe’s shares rose 35 cents to $41.51, closer to the high end of the stock’s 52-week range between $24.76 and $43.84. The stock has climbed 16 percent so far in 2013, the AP reported.

The AP contributed to this story.

This story was updated at 6 p.m. Monday to include new information from Lowe's.

(1) comment

Dirty Napkin
Dirty Napkin

Maybe NOW this end of tow will have a hardware store to go to, and they will stock more user friendly products!

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