CEO Approved to Buy National Home Centers

National Home Centers Inc. of Springdale announced on Oct. 5 that its board of directors has approved a revised offer from chairman and CEO, Dwain Newman, to buy all of the company’s outstanding stock he doesn’t already own for about $3.6 million.

Brent Hanby, National’s chief financial officer, said the company has been doing better during the past couple of years, but it’s stock price hasn’t reflected that.

The stock has been languishing between $1-$2.50 a share since 1997 although National went from losing money to being profitable again during that period. The stock price peaked at $15 per share in January 1994.

Hanby said going private will also allow National to protect some of its strategies from competitors. As a public company, National is required to file financial records with the Securities and Exchange Commission on at least a quarterly basis. National will no longer have to do that as a private company.

Newman, who founded the company in 1972, offered in August to buy the 2.6 million shares for $1.20 per share. In October, he upped that amount to $1.40.

The price represents a 22 percent premium over the stock’s closing price of $1.15 on Thursday.

According to National’s annual report, Newman owned 4.5 million shares, or 65.5 percent, of the company’s stock as of Jan. 31, the end of the last fiscal year. Hanby said that figure is still accurate.

National has been struggling for years after deciding to go after the retail home improvement market in the early 1990s. But competition from Home Depot and Lowe’s Home Improvement Warehouse was too tough, and National closed several stores around Arkansas to refocus on sales to contractors. Now, about 81 percent of National’s sales are to contractors and the remainder is retail. In 1996, half of National’s sales were to retail customers.

As a result, National made a profit in 1999 for the first time in five years and things have been improving since then. The company now operates eight lumber yards, all of which are in Arkansas and have small retail shops on the premises.

“We’ve shown a profit for nine out of the last 10 quarters,” Hanby said. “But the stock hasn’t done anything.”

The stock price did jump the morning news broke of the buyout by Newman. The shares were up 20 cents, or 17 percent, to $1.35. A total of 143,700 shares of National had changed hands that morning. Average daily volume is 2,909.

Duff & Phelps, an investment banking and financial advisory firm hired by a special committee, determined that Newman’s offer “is fair from a financial point of view” to the company’s minority shareholders. The company said its board voted to recommend that the minority shareholders accept the plan.

The company said Newman is expected to deliver formal tender offer documents to the shareholders before October 31, and the offer should remain open for at least 30 days. Newman has said that any shares not purchased in the offer will be acquired for the same price in cash in a second-step merger, National said.

After the tender offer is complete, National will no longer trade on the Nasdaq Small Cap market.