Orco no more
Orco Construction Supply, the Livermore, Calif.-based distributor of fasteners, tools and construction materials for residential contractors, was purchased out of bankruptcy court on May 15 by HD Supply’s White Cap division.
White Cap has begun to re-brand Orco’s 11 remaining locations: eight units in California, two in Arizona and one in North Las Vegas, plus two rebar facilities.
Although White Cap and Orco are a perfect fit—they sell the same products to the same customer base throughout California—the news jolted many members of the specialty tools and hardware industry. Orco had filed for bankruptcy protection under section 363 of the bankruptcy code, which expedites the sale of a company’s assets to a “stalking horse” buyer who has already done his or her due diligence. This committed buyer was Greg Grosch, the former chairman of White Cap.
Grosch’s father, Irv, founded White Cap in Costa Mesa, Calif., where the company still has its headquarters. In 1997, Greg Grosch sold White Cap to KRG Capital, a Denver-based investment firm. White Cap made a number of acquisitions and grew to 70 locations in 17 states before Home Depot purchased it in 2004. Home Depot spun off its HD Supply division, which included White Cap, in 2007.
Court papers show that, following the April 6 bankruptcy court filing in the Northern District of California, other bidders were given one month to express an interest in Orco’s assets. Approximately 20 potential investors stepped forward, although this list was eventually pared down to a handful of people. Although Grosch’s involvement was well known, the identities of the other parties were not.
“The whole Orco crew was cheering for Greg,” said one industry source, requesting anonymity.
On May 13, at 10:00 a.m., the bidding commenced. By the time it was over, HD Supply had outbid everyone. court papers list the purchase price as $17 million, with some adjustments made for accounts receivables, inventory and other considerations.
Residential framers made up almost 70% of Orco’s customer base, so the company was hard hit by the building downturn in California. In 2007, the year it celebrated its 50th anniversary, Orco operated 20 units with annual sales of $227 million. But over the past year, the chain has been closing locations. New initiatives into commercial sales or more business with concrete vendors weren’t enough to keep the company afloat.
White Cap, which operates 35 units in California, was Orco’s main competitor. A spokeswoman for HD Supply could not confirm if White Cap will retain any of Orco’s management team or employees.
When reached for comment, both of Orco’s top executives deferred to HD Supply. “We have agreed that HDS needs to be the conduit for communication,” said Peter Alexander, Orco president and CEO, in an e-mail.
Hal Look, senior VP marketing and business development at Orco, did say that he was moving on. In an e-mail sent out to many of Orco’s suppliers, he thanked the vendor community for its support and asked that they remember “the 50 years previous to the last 12 months, [which] shows what a great vendor/distributor partnership can be.”
A longtime building industry executive, Look will continue as the president of the Specialty Tools & Fasteners Distributors Association (STAFDA), said executive director Georgia Foley. Asked about further consolidation among specialty distributors, Foley said: “Most of the STAFDA folks are continuing to be independent. They’re holding their own.”