Harvey Electronics, the metro New York-based chain, has agreed to a $10 million deal to buy Washington, D.C.-based MyerEmco Audio Video, giving the combined operation 19 stores stretching from the Northeast to the Mid-Atlantic states.
In an 8-K report filed by Harvey May 11, which indicated the cost of the deal, it is scheduled to close on or before June 7.
Gary Yacoubian, president and COO of MyerEmco, will assume the same role at the combined company, according to Andy Stackpole, chairman of Harvey and managing partner of private equity firm Trinity Investment Partners, which took over Harvey last year. "In his 19 years at MyerEmco, Gary has done an incredible job of building it into the country's best high-end consumer electronics retailer and custom installer."
Yacoubian said the new umbrella company will be called Harvey Electronics, but each chain will retain its individual brand name in existing markets.
Harvey Electronics operates nine stores in the New York metro area while MyerEmco runs 10 stores. According to the TWICE Consumer Electronics Top 100 Retailers Report (see p. 17), Harvey had sales during calendar year 2006 of $37 million while MyerEmco had $38 million. Both chains are members of the Professional Retailers Organization (PRO) Group, and the announcement was made during PRO's annual meeting in Scottsdale, Ariz., on May 8.
The 8-K showed that Harvey has entered into a stock purchase agreement with privately held MyerEmco to buy 86 percent of the chain with the purchase price for the shares being $10 million, of which $1 million will be escrowed until May 31, 2008. Jon Myer, CEO of MyerEmco, has agreed to a non-compete clause for five years from the date of the closing where Harvey or MyerEmco current have operations and for three years in any other state east of the Mississippi River, the 8-K stated.
The deal includes a condition that Yacoubian enter into an employment agreement with Harvey and that the owners of the other 14 percent of MyerEmco also must sell their stake to Harvey by the June 7 closing.
Yacoubian, when asked if he ever heard of two retailers merging during a buying group meeting, told TWICE, "We timed this. We didn't want to have 19 separate one-on-one meetings scheduled with our suppliers" and then later announce the deal. He said that he will be based out of his Maryland office and "will probably go to New York half the time."
Yacoubian noted that there is a "reasonable amount" of overlap in brands between the two chains and that there "is no conflict" in the brands they carry. "We will consider ourselves a regional retailer" when the deal is completed vs. "retailers in two different markets."
Martin McClanan, interim CEO of Harvey, told TWICE at the PRO Group meeting that he considered the deal a "merger of equals." He added, "Harvey is better at retail than MyerEmco, while they are better at custom installation. We will learn each other's best practices."
Yacoubian said that MyerEmco is profitable. During February, Harvey reported a net loss of $3.2 million for its fiscal year, ended Oct. 28, 2006, compared with a net loss of $830,000 for fiscal 2005.
There are "two separate advertising markets involved" between the two chains, metro D.C. and metro New York City, Yacoubian noted. McClanan told TWICE, "For manufacturers who want to present their lines to the Washington, Baltimore and New York markets with a unified message and approach, they can come to us."
When asked about expansion, McClanan noted, "We need to execute the transaction and integrate our operations. We need to build strong fundamentals. Then growth is possible."
Yacoubian said fellow PRO Group members and suppliers at the meeting were supportive of the move. MyerEmco is a long-time PRO member while Harvey has been a member for less than a year.
"The group and the industry have a tremendous amount of respect for Gary [Yacoubian's] skills. What Trinity Partners [Harvey's main investor] is saying is that they are in [specialty retailing] for the long term, and that's a positive thing. [Harvey and MyerEmco] will remain PRO members. It says a lot that investors still think highly of specialty retailers," said Dave Workman, executive director of the PRO Group.
Jim Sanduski, VP/GM of digital TV solutions for HP's personal systems group, said, "They are two great brands in two different markets. Their customer base is similar and they go to market in a similar way. It is a good opportunity for both [chains] and Gary [Yacoubian] has a great deal of industry knowledge."
Max Wasinger, sales and marketing senior VP for Mitsubishi, said, "This is exciting," because the combined operation "can now grow, leverage their core competencies, manpower and business philosophies. This isn't surprising [because each chain] has top-notch talent."
And in an e-mail to TWICE Bob Scaglione, senior VP and GM, Sharp Electronics, said, "The joining of these two prominent retail outlets is a perfect opportunity for Harvey to enhance its brand awareness even further down the East Coast. Sharp has always had a great relationship with both Harvey and MyerEmco, and we look forward to a continued strong presence for the Sharp brand." — Additional reporting by John Laposky and Greg Tarr