June 16 was supposed to be a big day for At Home. The Texas-based home furnishings retail chain has been trying to go private in a leveraged buyout since early May, and was slated to hold its annual meeting last week. Instead, it was “postponed,” which might be a euphemism for “canceled,” as the company deals with large shareholders who are opposing the deal and trying to get a better price, a better bidder—or both.
It’s a fascinating saga, one rarely seen these days when financial deals are often signed, sealed and delivered way before most shareholders, employees and customers have a clue what’s going on. And even when things are contested, as in this case, it’s often pretty clear how it will all turn out. Not so with At Home.
A little background: At Home features giant stores—about 220 in total, sometimes as large as 200,000 square feet, and scattered across most of the country. With annual sales of about $1.4 billion, it ranks as one of the top sellers of home products in the country, with a heavy focus on accessories, rugs, outdoor, accent furniture, home textiles and housewares. Most of its offerings are private-label, and its price range tends toward the lower middle of the marketplace.
Built on the bones of a previous, much smaller retail chain called Garden Ridge, At Home has been a big beneficiary of the boom in home furnishings sales the past 18 months as Americans spent a disproportionate amount of disposable income on their homes. A year ago, the company’s stock price was hovering around $2 a share, meaning At Home was dangerously close to being delisted from the stock market—or worse, filing for bankruptcy. But when the boom hit, the brand’s sales and stock went up significantly, the latter by more than 300 percent.
Cut to May 6, when—in a surprise to just about everybody outside top management—At Home said it had agreed to be bought by private equity firm Hellman & Friedman in a deal valued at $2.8 billion that would result in the company going private. The price per share, $36, represented a premium, but apparently not enough for all the parties involved. Two of its largest shareholders—CAS Investment Partners and Honest Capital—came out and said they were opposing the deal, claiming At Home was not seeking better offers. The company and its suitor then upped their offer by a buck, but the deal’s opponents weren’t having any part of it.
That’s essentially where things still stand. At Home released its first-quarter numbers in early June and, as expected, they showed enormous increases in same-store sales given that most of its physical locations were closed a year ago. Without any e-commerce revenue, the retailer depends on its stores for all its revenue. The stock price, in the meantime, has hovered just below the $37 mark, indicating speculators are not expecting any higher competing offer to come in. CAS says the deal is “flawed and riddled with conflict,” and that company CEO Lee Bird stands to make $100 million for himself on the deal. At Home says it expects to begin the tender offer this month.
Sometimes a white knight comes along in situations like this, snatching victory from the jaws of dispute. But there hasn’t been a hint of anybody else interested, and big retail chains—particularly ones with zero online revenue—are not usually prime acquisition candidates these days. Based on how these things have gone in the past, the more likely outcome is that the terms of the deal will be raised again, those against it will drop their opposition and take the enhanced offer, and of course, the attorneys on all sides will collect handsome fees for their efforts.
Homepage image: An At Home dining collection | At Home
Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.