Storage and organization products retailer The Container Store has retained JPMorgan Chase & Co.
The Container Store posted about $500 million in revenues for 2006; the annual growth rate is about 15% to 20%, and EBITDA is estimated to be $50 million. The company has 38 locations in 17 markets; the average store is 25,000 square feet and comes with more than 10,000 products for your kitchen, closet, office and laundry. The Container Store is listed as No. 4 on Fortune's list of "100 Best Companies to Work For."
So, why sell out? Well, two of the co-founders (The Container Store got its start in 1978) are still heavily involved in the company: Kip Tindell is the CEO and co-chairman, and Garrett Boone is the co-chairman. And it looks like the Boone family wants to get liquidity. This is fairly common for family businesses, and is likely to be a major trend as the U.S. population ages.
The good news is that Tindell and Boone want to stay on board -- private equity firms always like to keep a proven management team. However, Tindell and Boone also want to have lots of control, which is something that's not so favorable to equity investors. Private equity firms typically like to keep the option to make operational changes, as well as move for an exit (such as a merger or IPO). And they should -- after all, they are paying hard cash for the company.
Over the past few years, there have been a variety of private equity buyouts in the retail sector. Some of the names include Michael's Stores, The Sports Authority, Burlington Coat Factory, and Linens 'n Things.
But the market environment can change quickly, and there are some indications of pushback from private equity firms. Jones Apparel Group
It's understandable that Tindell and Boone want to preserve the family atmosphere while also getting top dollar. Their business is unique and has lots of room for growth. But private equity firms need to make returns, too. It's likely that The Container Store will need to make some compromises to get a deal done.
For more on the companies mentioned above, check out:
- Claire's Buyout Loses Some Luster
- Jones Apparel Dresses Up: Fool by Numbers
- Eddie Bauer: Is It That Cheap?