Tuesday, January 05, 2016

Will KKR love MFF?

Mills Fleet Farm has been sold:
Family-owned Mills Fleet Farm has agreed to sell to New York-based KKR, one of the country’s largest investment concerns that has holdings in various industries totaling about $100 billion.

Terms of the deal, expected to be announced Tuesday, were not disclosed. However, after the Mills family put the privately held chain of 35 stores up for sale last fall there was speculation in the investment trade nationally that it would fetch in neighborhood of $1 billion. Reuters last month cited unnamed sources putting a likely price tag at more than $1.2 billion, including debt.
A few thoughts:

  • While Fleet Farm is headquartered in Brainerd, it has long been an important employer in my hometown of Appleton, Wisconsin. Hundreds of people who work in merchandising and operations are headquartered there and a lot of people are likely getting nervous about it.
  • The notion put forth is that KKR is going to expand the brand beyond the area where Fleet Farm currently operates (the Dakotas, Minnesota and Wisconsin). I'm a big fan of Fleet Farm, but I'm not sure what they do will translate well in other parts of the country. Put it this way -- I don't expect we'll be seeing orange silos in New Jersey any time soon.
  • Some people are speculating that the sale is more about the political ambitions of Stewart Mills, who will again run for Congress in this cycle. I don't think that's the reason for the sale, though. Mills has plenty of money for his campaign.
The larger question, in my mind, is whether a giant conglomerate will really embrace what makes Fleet Farm a successful operation. Most retailers target the female customer; Fleet Farm has called itself "The Man's Mall" and has pursued a decidedly male customer base. One thing worth noting, though -- for all the farm equipment and tires that Fleet Farm sells, it has always been a formidable softlines retailer and clothing is a huge part of their overall assortment. I wonder if that will be a focus for the new ownership. It's going to be fascinating to watch.

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