On Monday, Ace Hardware Corp. announced it had finalized plans to acquire Spokane, Washington-based Jensen Distribution Services. This acquisition comes less than a year after Ace purchased Emery-Waterhouse of Maine.
Hardware Retailing had the opportunity to speak with John Venhuizen, Ace Hardware’s president and CEO, to get more details about this latest acquisition and learn how the move reflects Ace’s future growth plans.
Hardware Retailing: Could you tell us why you felt Jensen made a good addition to the Ace distribution network?
John Venhuizen: Our view is pretty well known in the industry that of the pure independents, outside the co-ops, both Emery’s and Jensen’s retailers represent some of the best in the business. The culture and value alignment that we have here at Ace was very much aligned with that of both Jensen and Emery. We’ve always respected them, even though we’ve been competitors.
HR: When combined with the Emery acquisition, you now have distribution centers on the east and west coasts. Are you looking at any acquisitions in the mid U.S.?
JV: I would candidly tell you that we weren’t even looking at Jensen. John Surane (Ace executive vice president of marketing, merchandising and sales) and I received a call and we took it out of our respect to Mike Jensen and the way he has always done business.
Having them both on the opposite coasts is both fortuitous and strategic. It is our goal to provide the best and largest distribution platform for both Ace retailers and pure independents who are not unified by a common brand.
Our strategy as we move to the middle is to leverage our current distribution centers and assets to service customers in those areas.
HR: How do you plan to combine Jensen’s existing customer base into the Ace dealer network? Will these dealers become members?
JV: No customer of Ace, no customer of Jensen, will be forced to go one way or another. We view this as really the best of both worlds now. Jensen and Emery are not cooperatives and if their customers want to continue to buy hardlines products from an independent distributor and remain purely independent retailers, they are welcome to do so without any investment or stock requirements. On the other hand, if they want to be part of what we believe to be the most competitive convenience hardware offering, under the Ace banner, then they can choose to be Ace.
HR: If an independent retailer wants to do business with Ace and remain independent, how will the services they receive differ from those received by a full Ace member?
JV: There are three main things these purely independent retailers would not have access to. One, the Ace brand. Two, the operating methods, the means by which we believe convenience hardware store operators can best run their businesses. Three, access to exclusive lines like Craftsman, Ace private-label products, Clark+Kensington, etc.
HR: What did you learn both positively and negatively from the Emery acquisition that came into play with Jensen?
JV: One thing we learned was that there are wonderful, long-standing salesforce relationships that we think both Emery and Jensen have excelled at over the years. They know things about selling to independents that we don’t and we are going to continue to leverage that and learn from it.
I guess you could say, on the hard assets, we plan to leverage the Ace infrastructure. On the soft assets — relationships with the salesforce, independents working closely with their salespeople — we want to continue to leverage their assets and knowhow and learn from that.
HR: How do you finance this type of acquisition? Does it require debt accumulation or is it out of operating funds?
JV: No. We are not taking on any additional debt or refinancing. Most of this will come out of a line of credit and we also have a lot of access to capital. Our funding and capital allocation to our retail Ace convenience hardware growth strategy remains fully funded and this acquisition didn’t take any capital away from that.
HR: What would you say the benefits are to this type of acquisition for the retailers you serve?
JV: It’s really three different things.
One, our retail strategy demands that we have a world-class wholesale infrastructure. This helps us ensure that we have that and can continue to grow it.
Two, the price synchronization and the benefits it delivers of being able to negotiate with bigger purchasing power. Just from the Emery acquisition, in less than 10 months we have already delivered more than $4 million in Cost of Goods savings to Ace members and more than $1 million to Emery customers.
Lastly, we believe this is a big growth vehicle for Ace because it allows us to provide the purely independent retailers with other advantages they don’t currently have while at the same time bringing value to our shareholders economically as well.
To read more about the acquisition, click here.