Hechinger Co. announced yesterday that it had reached an agreement to buy another do-it-yourself chain, Home Quarters Warehouse Inc., for $66 million.
The acquisition of the six-store Virginia Beach company is the first for 76-year-old Hechinger's, one of the nation's leading do-it-yourself home center chains.
When the transaction is completed early next year, it will give the Landover firm immediate entry into the hotly competitive "warehouse" portion of the do-it-yourself retail industry.
Until now, Hechinger's has only experimented with the no-frills, high-volume warehouse concept, preferring to keep to its conventional retailing formula with fashionable displays and greater offerings of decorative home products and housewares.
However, President John W. Hechinger Jr. said the company had decided to enter the warehouse market now because of the opportunity to buy the two-year-old Home Quarters chain.
The opportunity arose when a planned public offering by Home Quarters was scuttled after the stock market collapse.
"We still believe in the way we're doing business, but customers like to shop in different ways, and this acquisition gives us a complementary way to go to market," Hechinger said. Hechinger's, which has a great deal of cash on its balance sheet, has hinted for several months that it was looking for acquisitions.
"It's a good event for both companies," said Frank C. Doczi, Home Quarters' president. "From Home Quarters' point of view, it is an opportunity for us to grow with a company that has the financial wherewithal to help us grow."
Home Quarters and Hechinger's serve several of the same cities in the Southeast, including Virginia Beach, Winston-Salem, Charleston and Charlotte.
But Home Quarters' no-frills approach seems to appeal mostly to homeowners involved in major, costly renovations, Doczi said, while Hechinger's sells to a variety of customers.
While Home Quarters' stores are about 33 percent larger than Hechinger units, Hechinger's selection is wider -- primarily because of its large decorative and housewares departments.
Hechinger's said it plans to operate the Home Quarters chain as a separate subsidiary, with headquarters in Virginia Beach. Doczi will remain as president, while Chairman Bernard R. Kossar will become a consultant to Home Quarters and Hechinger's.
Hechinger's said it intends to adhere to Home Quarters' expansion plans, opening two stores early next year.
Meanwhile, Hechinger's plans to add another 14 stores next year to its current 69 outlets.
The acquisition comes at a critical time for Home Quarters, whose first store was opened in 1985 by conglomerate W.R. Grace & Co.
Grace sold Home Quarters to the chain's management in October 1986, when Grace decided to sell its retailing operations.
Home Quarters has been doing well since then, with sales last year totaling $65.4 million and profits reaching $492,000.
Hechinger's had sales of $588.4 million last year and earned $28.3 million.
To fund its expansion plans, Home Quarters had been hoping to raise $83 million through a stock sale, according to a prospectus issued in the fall.
But its plans fell through when the stock market collapsed in mid-October.
Although Hechinger's offer to buy Home Quarters is $17 million less than Home Quarters hoped to get from the sale of stock, it is "a fair price at this time," said Doczi, who said Hechinger's offer was "unsolicited."
Although surprised by the acquisition, industry officials and financial analysts yesterday praised the move.
"It's a good-news situation for Hechinger's," said Wyatt Kash, publisher of National Home Center News, which monitors the do-it-yourself industry. "It gives Hechinger's immediate leverage in all markets where Home Quarters stores are, eliminates competition and strengthens their market position."