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Newport Firm, Managers Get OK to Buy Strouds

Housewares: A bankruptcy judge approves the $39.5-million deal involving Cruttenden Partners.

April 17, 2001|LESLIE EARNEST | TIMES STAFF WRITER

Ailing linen retailer Strouds Inc. is being sold to an Orange County investment firm and the retailer's senior executives for about $39.5 million.

A U.S. Bankruptcy Court judge in Delaware has approved the sale to a venture consisting of Cruttenden Partners LLC in Newport Beach and the executives, Strouds said Monday in a prepared statement.

Almost the entire Strouds management team will continue working for the new controlling entity, Strouds Acquisition Corp., Strouds said.

Robert F. Valone, the retailer's general merchandise manager, will become president of the reorganized company. Gary A. Van Wagner, Strouds chief financial officer, will keep that title and become chief operating officer as well.

But analysts say the city of Industry-based retailer still faces some of the same obstacles that contributed to its financial difficulties.

The company's biggest competitors remain Bed Bath & Beyond Inc. and Linens 'n Things Inc., larger stores that typically carry a broader range of merchandise, including small appliances. And it also must do battle with such huge retailers as Wal-Mart Stores Inc., Target Corp. and May Department Stores Co., which sell similar merchandise.

"It's going to be a challenge," said Shelly Hale, an analyst with Banc of America Securities. "The Strouds format of just offering soft goods may be the wrong format for the times."

Others, however, think Strouds should continue concentrating on soft goods, such as bedding, bath products and table linens.

"They might have a chance if they stay focused on the linens business," said Joan L. Bogucki-Storms, an analyst with Wedbush Morgan Securities.

Strouds' management could not be reached for comment about the company's future strategy.

While sales have cooled somewhat in the industry, housewares still look promising, Hale said. Baby boomers continue to pour money into their houses, and second-home ownership is at an all-time high.

Strouds, which opened its first store in Pasadena in 1979, filed for Chapter 11 bankruptcy protection in September. At that time, it was operating 70 stores. Today, it has 50 stores in California, Nevada, Minnesota and Arizona.

The over-the-counter stock closed unchanged Monday at 1.5 cents a share.

The sale is scheduled to close this month.

Cruttenden Partners is a venture capital firm headed by Walter Cruttenden III, who founded Cruttenden Roth Inc. in Irvine in 1977. He resigned in 1998 from Cruttenden Roth, which became Roth Capital Partners Inc.

Last year, Cruttenden Partners was the lead investor in a venture that raised $5.5 million to expand the operations of NetChemistry, a Newport Beach electronic-business company for the financial services sector.

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