Costco Acquires Innovel Solutions from Transformco for $1 Billion

HOFFMAN ESTATES, Ill., March 17, 2020 /PRNewswire/ -- Transform Holdco (TFCO) announced today that Costco (NASDAQ: COST) has acquired Innovel Solutions, its middle mile and final mile delivery and installation business, for $1 billion.  Key components of the agreement include a long-term commercial arrangement whereby Costco provides TFCO warehousing, delivery and installation services to Sears and Kmart members and Costco will retain over 1,500 Innovel employees on a go-forward basis. Additionally, Costco will enter into a long-term commercial agreement whereby Costco will leverage TFCO's Service Live platform to source technicians for complex installations across the country.

This transaction will provide Innovel and its employees with the resources to continue to build out a best in class logistics platform and the proceeds from the sale will allow TFCO to repay all of its non-real estate debt.  It also positions TFCO to pursue other transformative actions to fully leverage its core assets and capabilities to realize maximum value for all stakeholders.   

Over the past year, during an extremely challenging retail environment, TFCO's associates have worked tirelessly to restore vendor relationships and to maintain financial support from its lenders with a focus to return the company's retail operations to profitability.  Despite these efforts, the support TFCO received fell well short of its needs. As a result, the Sears and Kmart store formats have experienced declining sales and continued losses, consistent with trends for department store and other legacy retailers.

TFCO plans to further streamline retail operations over the next several months and focus on those stores with a strong record of success or meaningful real estate value. Although the Company will reduce its store footprint, TFCO is committed to fulfilling its obligations to all of its vendors.

TFCO currently owns or leases over 500 retail properties and supporting facilities. The Company will focus its efforts on creating value from this significant real estate portfolio and intends to continue to evolve its small store format as a complement to the other core businesses.

TFCO intends to put additional focus and emphasis on its Kenmore and DieHard brands.  In December 2019, TFCO sold the DieHard brand to Advance Auto Parts. That agreement provided for TFCO to retain DieHard branded non-automotive categories as a royalty-free licensed business in perpetuity.  TFCO intends to build these iconic brands globally, in partnership with manufacturing leaders, distributors and retailers.

In addition, TFCO will continue to evolve its Shop Your Way membership program and its associated Shop Your Way 5-3-2-1 credit card to create value from the vast membership base and creative marketing capabilities. TFCO will also continue to operate its Home Services business and grow its Home Warranty, Protection Agreement and Service Live businesses. 

TFCO will continue to work with its financial and legal advisors to adjust its capital structure and to pursue partnerships and transactions with third parties to maximize the value of its assets. 

These transformative actions allow TFCO to focus on its core assets and capabilities to deliver service excellence for its members and customers. The company believes this roadmap, which primarily focuses on its Real Estate, Home Services, Brands and Shop Your Way membership program, gives it the best chance to grow value and to maintain a meaningful retail presence in the United States to support the expansion of its core businesses.

Guggenheim Securities, LLC served as financial advisor and Wachtell, Lipton, Rosen & Katz and DLA Piper served as legal counsel to Transform Holdco in connection with this transaction.

About Transformco

Transform Holdco, LLC is a leading integrated retailer focused on seamlessly connecting the digital and physical shopping experiences to serve its members – wherever, whenever and however they want to shop. Transformco is home to Shop Your Way®, a social shopping platform offering members rewards for shopping at Sears, Kmart and other retail partners. Transformco operates through its subsidiaries with full-line and specialty retail stores across the United States.

About Costco

Costco currently operates 786 warehouses, including 547 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 29 in the United Kingdom, 26 in Japan, 16 in Korea, 13 in Taiwan, 11 in Australia, two in Spain, and one each in Iceland, France, and China. Costco also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan, and Australia.

SOURCE Transform Holdco, LLC