After struggling unsuccessfully to become large enough to survive in the competitive furniture business, Stor Furnishings International called it quits Tuesday, agreeing to be taken over by archrival Ikea.
The deal, expected to become final within six weeks, was valued at more than $20 million.
With the takeover, Ikea, the world's largest furnisher retailer with 100 outlets and $3.8 billion in annual sales worldwide, will put its name on Stor's three Southern California outlets, giving it four stores in the region. Ikea, which plans to open a fifth Southern California store in April in Fontana, also will take over Stor's only outlet outside of California, a store in Houston.
Ikea's acquisition makes the Swedish company--which pioneered the concept of low-cost, ready-to-assemble European furniture warehouses in the United States--one of Southern California's strongest and most visible furniture merchants. The deal follows a flurry of closings and bankruptcy reorganizations of other major furniture retailers in the area in 1991.
The takeover, which was actively sought by Stor, closes a competitive battle that began when Stor opened its first outlet in the City of Industry in 1987. That same year, Ikea accused Stor in a lawsuit of copying nearly its entire method of doing business--from its warehouse layout to the print typeface on its catalogues. The suit was settled a year later when Stor agreed to change some of its operations.
According to analysts, Stor was the victim of the things it couldn't copy from Ikea: its financial strength and the clout it had with suppliers by virtue of its size.
"The prolonged recession, with its negative effect on housing starts, commercial real estate and retailers, created difficult problems for a company like Stor, which was striving to expand its operations," said Richard F. Clayton, Stor's chairman and chief executive.
After opening its first outlet, Stor had grand designs to expand with dozens of additional stores. However, the company lost money from the beginning and ran into difficulty raising money to finance an expansion. The chain never extended beyond its stores in the City of Industry, Tustin, Torrance and Houston, where it opened in October.
Meanwhile, in late 1990, Ikea entered Southern California, Stor's prime territory, and immediately hit a responsive chord among consumers with its Burbank outlet. Ikea, which had planned to expand operations in the region significantly over the next several years, said the Stor purchase will further those ambitions.
"Ikea was contacted several months ago by Stor, to either finance or acquire Stor," said Goran Carstedt, president of Ikea. "Since Ikea had already planned to expand further in the greater Los Angeles market, this opportunity was approached with great interest. By choosing this alternative, Ikea can gain quicker access to the market, as well as employing Stor's existing staff and other resources."
Analysts said Ikea has patiently built its operations in the United States, where it has opened seven stores in the last six years, by aiming its contemporary-styled furniture at young, mobile, trendy and budget-conscious customers. Students, young-marrieds and foreign-born consumers are prime customers, analysts say, because they are comfortable with Ikea's do-it-yourself approach.
Buyers look at assembled furnishings in display areas, then pick up many of the goods in boxes in warehouse sections of the stores. There are rumpus rooms to keep children busy while parents shop, and cafeterias with low-priced Swedish food.
The agreement calls for Ikea to make a cash tender offer for all of the outstanding common stock and non-voting common stock of Stor at $3.10 per share, the equivalent of about $20 million.
Stor stock jumped 94 cents to close at $2.94 in over-the-counter trading Tuesday. The stock was initially sold to investors at $8 a share in April, 1990, but plunged to $1.50 by the end of 1990 as profits for the retailer failed to materialize.
Ikea at a Glance
Headquarters: U.S. operations based in Plymouth Meeting, Pa., but the company's international headquarters is in Almhult, Sweden.
Outlets: 100, including one in Southern California.
Annual sales: $3.8 billion, including $284 million from its seven U.S. stores.
Net income: Not disclosed.