Hooker Furniture to Buy Home Meridian

January 6, 2016  by in Acquisition, Industry   

The acquisition will more than double the size of Hooker Furniture and push it into the top 5 of furniture suppliers in the U.S. 

In what would be the largest acquisition in Hooker's 91-year history, the company has entered into an asset purchase agreement to acquire substantially all of the assets and certain liabilities of HMI for about $100 million, comprised of $85 million in cash and $15 million of newly-issued HOFT stock. Both the cash portion and the stock portion of the purchase price are subject to customary working capital adjustments.

It is anticipated that HMI will operate autonomously as a division of Hooker, which, with the acquisition, is expected to surpass the half-billion-dollar sales mark. The combined companies had revenues over the trailing 12 months ending Oct. 31, in excess of $550 million. During the same time period operating income for the combined companies, which includes approximately $3.5 million of deal related costs, was $35.6 million.

"We are unbelievably excited at the prospect of having the individual businesses that comprise Home Meridian International become part of our Hooker Furniture Corporation stable of brands," said Paul B. Toms Jr., chairman and CEO. "Pulaski Furniture (PFC), Samuel Lawrence Furniture (SLF), Prime Resources (PRI), Sourcing Solutions Group (SSG), Right 2 Home (RTH) and Samuel Lawrence Hospitality (SLH) are all vibrant, well-run businesses addressing more moderate price points and some channels of distribution not currently served by the Hooker Furniture, Sam Moore, Bradington-Young, Homeware and/or H Contract brands.”

Toms said HMI’s strategy of supplying proprietary products and custom business solutions to large customers and alternative channels of distribution has resulted in annual sales growth of more than 15 percent during the last four years. "Growing sales at three times industry average is validation of their strategy," he said.

Hooker Furniture Corporation expects to operate HMI as a stand-alone business led by its current CEO, George Revington, and his current management team. Revington will serve as president and COO of the HMI division, with no visible changes to customers of either company. Revington will report to Toms.

"The HMI team is excited to join with Hooker Furniture Corporation to become one of the largest players in the industry," Revington said. "The success of these two companies is directly related to how they serve their customers and the new combination will make us even more effective and provides a great platform for future growth." 

Toms complimented the HMI management team commenting on the company’s presence in Vietnam, China and Malaysia. Toms said Hooker would look to leverage HMI’s Asian position for “enhanced vendor management and customer service."

The HMI division's headquarters will continue to be located in High Point, N.C., and Hooker\’s headquarters will remain in Martinsville, Va.

The combined global footprint of the companies will include upholstery manufacturing facilities in Hickory, N.C., and Bedford, Va., showrooms in High Point and Ho Chi Minh City, Vietnam, and eight distribution centers in North Carolina, Virginia, California, China and Vietnam.

Once combined, Hooker Furniture will have approximately 900 employees worldwide.

The companies' existing ERP operating systems and sales forces will remain in place and operate separately.

"While there will be no merger of operations or change in customer-facing services, we do see opportunity to improve each company by sharing best practices and looking for ways to work together to lower costs, improve efficiency and grow sales," Toms said. "Although Hooker Furniture Corporation has been debt-free for some time, we look at this acquisition as an excellent way to put excess capital to work and use our pristine balance sheet to layer in a manageable amount of low-cost debt. We expect the transaction to be accretive to earnings immediately."

The transaction is expected to close in the first quarter of 2016 but not before Feb. 1. The deal is subject to an anti-trust regulatory review and other customary closing conditions. The transaction does not require approval by Hooker's shareholders.

In connection with the agreement to purchase the business of HMI, Hooker also entered into a commitment letter with Bank of America, N.A. pursuant to which BofA has committed to provide debt financing for the transactions contemplated in the form of a $90 million senior credit facility. The obligation of BofA to provide this debt financing is subject to a number of customary conditions.