Ames deals variety div. to McCrory for $80M; retailer to focus efforts on discount department stores - Ames Department Stores Inc. sells G.C. Murphy Co. division to E-II Holdings Inc., parent of McCrory Variety Stores

Ames Deals Variety Div. To McCrory for $80M

Retailer to Focus Efforts on Discount Department Stores

ROCKY HILL, Conn. -- As expected, Ames Department Stores has sold its G.C. Murphy variety store division to McCrory parent E-II Holdings Inc. Ames originally acquired 263 variety stores, along with 118 Murphy's Mart discount stores, in 1985 in a $205 million takeover.

The current 130 Murphy stores, along with 25 Bargain World units, which reported sales of approximately $175 million last year, were sold for $80 million. "We were very happy with the price," said Ames spokesman Bill Roberts.

President and ceo Peter Hollis explained the deal by saying that "the Zayre acquisition has positioned us to achieve long-term growth in general merchandise retailing, which will continue to be the primary focus of our growth and investment."

Variety stores, although profitable and at one time a significant part of Ames' business, were a drain on the work force and did not fit in with the firm's long-term plans, he said.

The proceeds of the sale will be used to retire long-term debt, Hollis said. After applying the after-tax total to debt, the company will have reduced long-term debt related to the Zayre acquisition from $425 million to approximately $235 million in less than a year.

Hollis had mentioned that Murphy might be for sale at the annual shareholders meeting in June, but added that Ames required fair value. In addition, he said at that time that a major priority in the coming year would be to reduce the company's debt load.

The sales agreement should be final by mid-September. Significantly, after suggesting that Office Shop Warehouse, Ames' office supplies specialty operation, might be for sale along with Murphy, Ames decided to keep it. "It's an area that shows a lot of promise, so we want keep an eye on it," he said.

Impact on Ames' sales is expected to be "insignificant," Roberts said. With Ames' fiscal 1990 revenues estimated at $5 billion, increased attention to the turnaround of the troubled Zayre stores was considered more important than the $175 million in sales rung up by the variety stores.

According to E-II Holdings, the newly acquired stores will still be called G.C. Murphy and Bargain World. According to McCrory Stores chairman Philip Lux, "The ...stores are a natural fit for E-II Holdings, which already owns McCrory Stores and Bargain Time Inc. The addition of these stores is part of the expansion program we have been committed to in variety store retailing."

Lux added that the acquisition strengthens the company in key states like Indiana, Ohio and Pennsylvania. McCrory operates 1,300 stores in 38 states under a variety of names, including J.J. Newberry, McCrory, T.G.&Y., McLellan and Kittinger. Annual sales are in excess of $1.5 billion.

Chuck Merck, a former McCrory regional manager, will head up the new G.C. Murphy division.

COPYRIGHT 1989 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
COPYRIGHT 2004 Gale Group