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ShopKo to merge with corporation
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Shopko Stores, Inc. announced Friday it signed a merger agreement with Badger Holding, Inc., in an effort to improve the big-box retailer’s economic fortunes. Badger Holding, an affiliate Goldner Hawn Johnson & Morrison Incorporated, is a Minneapolis-based private equity investment firm. The business deal is valued at a little over $1 billion, including a $330 million debt.
ShopKo spokesperson John Vigeland said the merger is aimed at keeping the corporation competitive with other retailers.
“For the company, we think the merger makes sense,” Vigeland said. “Because if it is all approved, ShopKo will become a private company, which would allow us to focus on our customers, vendors and employees without having to focus as much on what Wall Street thinks of us.”
Vigeland said the merger will also let the company obtain additional financial backing.
“That should help us position business better in the future as well,” Vigeland said.
Though Shopko’s President and Executive Officer Sam Duncan will be leaving the company if the merger is completed, other members of ShopKo’s management are expected to remain with the corporation after the merger, Vigeland said.
“We anticipate that business will pretty much stay the same,” Vigeland said. “And the primary management team will stay in place.”
Headquartered in Green Bay, ShopKo Stores, Inc. is comprised of two divisions, a ShopKo division and its subsidiary, Pamida. The two divisions employ over 25,000 people and own more than 360 stores in 23 states with annual sales of about $3 billion.
ShopKo was founded by James Ruben in 1962. In 1991, ShopKo transitioned from being a private business to a public corporation. The Pamida chain was bought by ShopKo Stores, Inc. in 1999.
Mason Carpenter, a University of Wisconsin professor of strategic management, said maintaining a public firm has become more costly due to the illegal actions taken by other corporations, like Enron.
“Recent scandals have resulted in the increased scrutiny on firms and their boards and how they are managed,” Carpenter said. “But … that scrutiny is very expensive for a public company to pay for.”
Carpenter said when ShopKo went public the costs were not as burdensome. However, new governance laws have since been put into place since the outbreak of corporate scandal to prevent such actions from recurring.
“It is increasingly expensive for firms to be public because of all the regulatory requirements,” Carpenter said. “And that is a significant cost; it’s also a big distraction for management to be focused on quarterly earnings instead of the long term growth of the company.”
Private companies also have more flexibility with investments and involvement in social programs, Carpenter added.
Other mid-sized public firms are also dealing with the decision to go private in order to stay competitive with other companies, Carpenter said.
“If this makes ShopKo a better competitor, it will provide consumers with better prices or better choices and better service,” Carpenter said.
Though the merger is a billion-dollar transaction, Vigeland said ShopKo employees and customers will not see much of a difference in the way ShopKo operates. No layoffs or store closings are anticipated because of the merger.
“The goal here is to continue with business as usual, Vigeland said.”
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