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  Matchmaker, matchmaker ...

BENJ GALLANDER and BEN STADELMANN

Friday, June 11, 2004

Available for long-term relationship: recently formed menage-a-trois is seeking a larger, stronger, fourth party for marriage. A full tool belt with accompanying hardware is an absolute necessity. Discretion neither necessary nor desired. You'll hook up with a well-equipped partner, fully bilingual, with record revenues approaching $500 million, an improving bottom, and strong cash flow. Please note: zero interest in a long courtship, ready to get hitched now!

A less racy version of this personal ad has been making the rounds since last September, but thus far hardware player Sodisco Howden has not found an appropriate suitor. How sad that the enterprise has heard nary a peep, squeak, grunt or tweet — let alone a cacophony — of attention.

When we acquired it in December 2002 at $1.21 a share, Sodisco was attempting to emerge as a leaner, meaner company, shedding debt and financial losses faster than Jenny Craig can say "carbohydrates."

The plan worked, and once in fine fettle, Sodisco bought Marchands Unis and the Canadian operations of Ace Hardware. These outfits have now been well integrated, but Sodisco still lacks the size to challenge such behemoths as Canadian Tire and The Home Depot, or even to take a run at Rona. To step up a level, Sodisco will need to be on the other side of the takeover ledger.

After announcing that they were ready to be coupled, investors got all bug-eyed and the stock spiked to $3.35 before settling into a consistent hovering pattern near the $3 plateau. Last month, however, despite reporting excellent financial results, investors appeared to grow tired of waiting for a union. The stock price skidded to the recent level of $2.70. President and chief executive Jos Wintermans recently stated: "We see 2004 as a year of opportunity for our company. We are in a good position to continue revenue growth and margin improvement during the second quarter."

When purchased, our initial sell target on Sodisco was $4.74. While our game is not to bet on either short-term gains or takeovers, the possibility is a zesty sidebar to the type of long-term romance that takes time to develop. Given that the company is motivated, and the For Sale sign remains up, a buyer may yet be found, albeit at a lower level than our target. If not, we are comfortable with the long haul. This was never expected to be a short, cheap, tawdry affair.


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