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From Poolandspanews.com
By Ben Thomas of Pool & Spa News
Via Poolandspa.com Online Newsletter
September 2010
Las Vegas, NV USA

The nation’s largest pool and spa retailer is for sale. Private equity firm Leonard Green & Partners reportedly is asking for more than $1 billion for Leslie’s Poolmart, which operates 640 stores in 35 states. Interested buyers include Bain Capital, Madison Dearborn Partners and TPG. Goldman Sachs will manage the sales process.

In the past fiscal year, Leslie’s posted annual sales of $510 million, generating about $110 million in net earnings. Published reports also indicate that the company holds approximately $250 million in debt. Firm-to-firm sales, known as “secondary buyouts,” have long been popular in the financial industry, but are rare in the pool and spa market, particularly among retailers.

Brian Quint, president of Aqua Quip in Seattle, said that a change in private-equity ownership could mean more new advisers will work with the leadership staff at Leslie’s, which could bring fresh thinking to the pool industry.

“I think it’s good news that there’s outside capital looking to invest in our industry,” Quint said. “It’s good to get new sources of finance, new investment advisors, new strategies.”

A sale — depending on the price — could be seen as a positive for the pool industry. “It may imply that we’ve hit rock bottom, and now we’re bouncing off,” Quint said. “If someone’s coming in and buying in this environment, they may feel there’s an upside. What a great time to come in and buy if, indeed, value has been reset.”

The story of Leslie’s began in 1963, when Philip Leslie and his partner, Raymond Cesmat, launched a chain of pool supply stores throughout the Los Angeles area. In 1988, Leslie’s was sold to the Los Angeles-based venture capital firm Hancock Park Associates. In 1991, the investment bank Montgomery Securities issued 47 percent of the company’s stock as an initial public offering, and Hancock Park led Leslie’s through a period of sharp growth throughout the ’90s. In 1997, Hancock Park partnered with private-equity group Leonard Green & Partners to take the company entirely private.

But while the move may signal some degree of optimism among investors, many in the industry doubt the sale will have much effect on the pool business as a whole.

“It’s not a significant thing; companies buy and sell all the time,” said Charlie Schobel, the vice president and general manager of BioLab Inc. in Lawrenceville, Ga. Still, the new owners are likely to invest in the business to grow it, which might lead to more consumers making aftermarket purchases, Schobel observed. Others, however, feel that such a change is unlikely to be sparked by a private-equity sale.

“I don’t know that [this sale] means much of anything for the industry,” said Eric Mueller, president of the large Midwestern retail chain Watson’s, which is based in Cincinnati.

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