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Investment Firm, Management Team Buying H.H. Gregg

1/24/2005 02:00:00 AM Eastern

Regional white- and brown-goods powerhouse H.H. Gregg is being bought out by a partnership comprised of Freeman Spogli & Co., a private investment firm, and the retailer's management team, led by chairman/CEO Jerry Throgmartin, which will hold a minority interest in the 61-store chain.

The deal is designed to fund Gregg's aggressive expansion plans and allow family members to cash out their equity in the privately held business without taking the company public.

Terms of the agreement were not disclosed, although Moody's Investors Service pegged the price tag at $307.2 million. Freeman, a Los Angeles-based buyout firm that specializes in retail, direct marketing and distribution companies, will reportedly pay $111.2 million for an 80 percent stake in the chain, while Gregg's management will invest $27.8 million. The balance will be funded through debt financing, Moody's reported.

Throgmartin was unavailable for comment, but said in a statement that “We are very excited to be partnering with Freeman Spogli, a knowledgeable investor with a long and successful track record in the specialty retail industry. Freeman Spogli recognizes the special relationships we have with our customers, vendors and employees, and we believe our affiliation with Freeman Spogli will help us to continue the growth of the H.H. Gregg franchise.”

The definitive agreement calls for Throgmartin, president Dennis May and the rest of Gregg's current executive management team to continue to operate the business in their present capacities. The recapitalization is subject to customary closing conditions and is expected to be completed sometime this quarter.

“H.H. Gregg has established itself as a leader in the premium video and appliance business in each of its markets due to its extraordinary focus on customer service and superior product assortments,” said John Roth, a partner with Freeman Spogli. “Jerry Throgmartin, Dennis May and their team have done an outstanding job expanding the business and we are pleased to become a long-term investor and strategic partner. We look forward to helping H.H. Gregg continue its expansion.”

Gregg has been owned and operated by the Gregg and Throgmartin families since they founded the central Indiana chain in 1955. Beginning with its acquisition of prime Roberds real estate in the late 1990s, the company has been pursuing an ambitious multi-state build-out that has extended the franchise from Ohio to Alabama — and which compelled it to leave the NATM Buying Group in anticipation of territorial conflicts with other member dealers.

In an interview with the Indianapolis Star, Throgmartin said the company had been exploring investment options for the past several years to support its goal of opening six to eight stores a year and to provide capital for possible acquisitions.

Freeman, founded in 1983, has since invested $2 billion in 36 portfolio companies and is currently making investments from FS Equity Partners V, L.P., a $1 billion fund. The company maintains offices in Los Angeles and New York.

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