By Dennise Williams, Staff ReporterALTHOUGH the merger of Jamaica's two hardware giants was formally announced in June of 2003, the operations of Hardware & Lumber (H&L) True Value and Rapid Sheffield Co. Ltd. have not yet been combined.
In June, Grace bought 67 per cent of H&L True Value and its subsidiary, H&L Marine Co. Ltd from Pan Jamaican Investments (Pan Jam). Both hardware firms continue to have separate marketing campaigns and day-to-day operations, even though Grace, Kennedy & Company owns both firms.
Speaking to the Financial Gleaner, Ian Jackson, the general manager of Rapid Sheffield stated, "The deal has been done. Grace, Kennedy has bought H & L True Value and H &L Agri & Marine. We project that in the next three months we will get the organisations together. We will be forming a new company called Hardware and Lumber Limited (H&LL) which will be a wholly owned subsidiary of Grace, Kennedy." Jackson explained that there would be a merger of four existing companies into two divisions of H&LL.
"The hardware division of H&LL will consist of the merged operations of H&L True Value and Rapid Sheffield. We will also have an agricultural arm which will consist of Agro Grace Ltd. and H&L Agri & Marine Co. Ltd." The agricultural operations will be merged by December of this year, according to Jackson. "The agricultural entities are much smaller than the hardware companies so these will be easier to merge."
BRANCHES
Currently, H&L Agri and Marine Co. Ltd has one branch on Spanish Town Road while Agro Grace Ltd has four branches in Kingston, Southfield St. Elizabeth, Montego Bay and Brown's Town in St. Ann. Since the purchase has been completed, Grace is now taking a stock of both hardware businesses and will make an assessment of the way forward. Said Jackson, "By the end of the first quarter of 2004, the hardware outfits will be merged." One of the points of consideration are the overseas affiliations that both Rapid Sheffield and H&L True Value are a part of. Explained Jackson, "H&L has a co-operative agreement with True Value out of the United States. The co-operative is a group of individually owned hardware stores that operate under the True Value brand. It is not a franchise. We do not pay a monthly franchise fee. We have paid a one-time membership fee. Once the company adheres to the standards of True Value then the membership continues. Rapid Sheffield have a similar alliance with Do It Best out of Indiana, USA. That is also a co-operative.
"The challenge we face is which co-operative do we keep? Down the line we will have to choose the best alliance as one man cannot serve two masters." Jackson stated that the benefits of the co-operative includes support in the following ways:
Purchasing as part of a larger group
Store design and layout
Staff training
Store brands (True Value and Do It Best brands of products)
As to the future of the merged entity, Jackson states, "it is quite likely that we will retain the same number of stores." Incidentally, in Ocho Rios, there are plans under way to build a much larger facility and combine the existing locations of H&L True Value at 99 Main Street and Rapid Sheffield, on 144 Main Street. Currently, though, H&L True Value has five stores with 600 employees while Rapid Sheffield has 10 stores with 350 employees. "However, we will be looking at the staff complement of both stores. Right now, I don't know what level, if any staff cuts will take place. At this time, the most likely areas will be in the distribution centres and the head offices of both entities. Since we need only one of each, staff will most likely be let go there. With that said, we will seek to absorb excess H&L True Value and Rapid Sheffield staff either into the stores or into the wider Grace, Kennedy network."
NO RUSH
There is, however, no immediate rush. Both entities are continuing on their present, separate course to take advantage of the upcoming Christmas shopping season. Stated Jackson, "We are not rushing into this merger. Right now is the beginning of the busy season for hardware companies as people tend spend money on their houses during Christmas. For the agricultural side of the business, things are slow now and so that merger will take place to be ready for the 'spring' planting season for Jamaican farmers." And the new entity will greatly benefit the consumer. Jackson states, "The larger organisation will be able to get better prices. This will be passed on to consumers. The stores will be much more customer-friendly and there will be a greater selection of products. We will be more efficient overall." And while Jackson would not reveal the cost of the merger of the four entities into Hardware & Lumber Ltd, the initial acquisition of the H&L arm was done in the form of share swaps.
"Grace acquired Hardware & Lumber in the form of an exchange of shares. There was no real cost in terms of cash. Pan Jam received shares in Rapid Sheffield and Agro Grace. These companies are both privately owned by Grace and not traded on the Jamaica Stock Exchange." Earlier media reports stated that financial analysts gave estimated values to Hardware & Lumber of J$380 million and Rapid Sheffield and Agro Grace of $270 million. Jackson tells the Financial Gleaner that John Mahfood, the current chief operations officer of the Retail & Trading Division of Grace, Kennedy, will be the new chief operating officer of Hardware & Lumber Limited.
