LESCO sells assets

Discussion in 'Pesticide & Herbicide Application' started by ALVW, Aug 5, 2005.

  1. ALVW

    ALVW LawnSite Member
    Posts: 23

    PLATINUM EQUITY SIGNS AGREEMENT TO ACQUIRE SUPPLY CHAIN BUSINESS FROM LESCO INC.
    Jul 27, 2005

    BEVERLY HILLS, Calif. (July 27, 2005) – Platinum Equity announced today that it has reached a definitive agreement to acquire substantially all of the supply chain and distribution assets of LESCO Inc. (NASDAQ: LSCO), a leading provider of products and supplies to the professional turf care industry.

    The assets being acquired include four blending facilities and a majority of the company’s warehouse and distribution centers, along with consumable products inventory stored at those locations including fertilizer, seed, control products, combination products, pest control and related products.

    The agreement between LESCO Inc. and Turf Care Supply Corp., an acquisition entity established by Platinum for this transaction, was signed on July 26. The transaction is expected to close before the end of October 2005. Platinum intends to establish the business as a standalone company under a new name that will be announced as part of the post-closing transition.

    LESCO Inc. decided to divest its manufacturing and distribution operations in order to focus on its core Service Center and Lawn Care business. The purchase agreement includes a long-term supply contract in which the new company will continue providing manufacturing and distribution services to LESCO.

    “This is a transaction in which everyone benefits,” said Robert J. Wentworth, executive vice president for mergers and acquisitions at Platinum.

    “For LESCO, it’s a divestiture solution that allows the company to focus on its core business while ensuring continuity of service,” Mr. Wentworth said. “For Platinum, it’s an opportunity to acquire strong supply chain and distribution assets with recurring revenue and a solid future. And for the new company, it is an opportunity to succeed as a standalone business supported by Platinum’s resources and an ongoing business relationship with LESCO.”
     
  2. arborist-28

    arborist-28 LawnSite Member
    Posts: 246

    hmmm ... very interesting news ...c
     
  3. ALVW

    ALVW LawnSite Member
    Posts: 23

    Not totally unexpected. Looks as if they want to be a retailer of their own Lesco brand products. Trying to keep the LCO's they currently have as customers but also offering "professional" products to the DIY homeowner.
     
  4. turfmann

    turfmann LawnSite Platinum Member
    from PRM
    Posts: 4,536

    “This is a transaction in which everyone benefits,” said Robert J. Wentworth, executive vice president for mergers and acquisitions at Platinum.

    Everyone does not include you and me. I don't know about you but things have not been going in the right direction with these folks for quite some time and this is the obvious reason (packaging for a sale). Just by looking in the faces of the employees its obvious that its been a real struggle for them.
     
  5. Green Dreams

    Green Dreams LawnSite Senior Member
    from Texas
    Posts: 593

    I'd have to agree with the unhappy employees...I have been to my local branch once in the last 3 months. And that was for a lawn gun tip. They are very close for me, but I finally gave up on using them as a supplier...too expensive. And I don't like it when I want to buy something they have, but they have no way of delivering it.
     
  6. SHOWCASE LAWNS LLC

    SHOWCASE LAWNS LLC LawnSite Member
    Posts: 238

    I Have To Say Lesco Has Had A Great Run Despite Its Flaws But I Think This Plan Is Just Plain Stupid. They Lose Some Quality Control And Other Vital Parts Of The Business. And I Could Almost Guarantee The Little Guy Is Going To See A Hefty Price Increase. The Employees There Are Good People But The Company Treats Them Like Crap And Sometimes Stuff Rolls Down Hill ...........lets Hope They Keep The Focus On The Pros And Not Go After Joe Homeowner As The New Target Customer.
     
  7. Mowingman

    Mowingman LawnSite Platinum Member
    from Texas
    Posts: 4,666

    My guess is that this is the beginning of the end for Lesco. The company has been in financial trouble for years. They are going to sell the company off piece by piece in a way that maximizes there value. Soon to go will be the retail service centers. Look for a sale to someone like J.D. Landscapes, or Home Depot.
    My bet is that Lesco will not exist two years from now.
     
  8. TOMMY1115

    TOMMY1115 LawnSite Member
    Posts: 169

    I think this was a smart move for Lesco.

    Look at it from a business (Lesco's) standpoint.
    #1 Every bag of fert. they sold, a certain percentage of the profits had to go to the plants for repairs, upkeep, supplies, wages, etc. Now, they do not have that "EXPENSE". Now I'm sure that they'll be able to be more competitive being that they do not have that extra overhead.

    #2 Lesco was not operating the plant at full capacity. The only way the plant will make money is to have it running 24/7. More capacity = more income. Lesco's products will still be under the same quality standards it was before, the only thing is, the plant will be making fert for others now, just to fill out the capacity of the plant. Take mowing for example. If you ran your mowers for 3 hours a day 3 days a week, are making the most money you can? No, you have at least 31 more hours you can run your mower (assuming you only run your mowers for 8 hours a day 5 days a week, just an example).
    Same principle.

    I visit Lesco's message board on Yahoo every once in a while. They had some interesting things to say about this.
    http://finance.yahoo.com/q/mb?s=LSCO

    Plus, if you look at how much money will be given to Lesco for the sale, it basically makes them debt free.
     
  9. goforgreen2

    goforgreen2 LawnSite Member
    Posts: 57

    Now a 3rd party distributor and will be bought out soon
     
  10. tremor

    tremor LawnSite Bronze Member
    Posts: 1,476

    Wow, it's been a while. There are quite a few new names here now.

    Perhaps I can help explain.

    Martin's Ferry needs $25million in maintenance that would have squelched all new Service Center opneings for the next 2-3 years. This doesn't meet the current business model so....

    We are in agreement to capped tolling charge increases at =/> 2% per year or about the current budgetted rate. Raw material increases are what they are & this won't change. Cost position then should either stabilize or even improve over time.

    QC standards go UP in the deal since Platinum has the cash to make the necessary plant upgrades.

    We don't need to negotiate another Union contract....EVER! :blob3:

    Service expectations are written into the buy contract. But if the largest fertilizer blender in the world doesn't perform to the largest sellers expectations, someone else certainly will.

    LESCO in financial trouble? We have no debt. That's funny.

    Try to remember that the 4 plants we sold were producing about 35% of the products we sell on a balance of sales. So this move doesn't exactly represent the major departure in principal that it might look like from the outside.

    I suppose the proof will be in the service levels, quality, & stock value over the next few years.

    Steve
     

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