U. S. Dry Cleaning sets sites on creating chain through acquisitions
A California company, U.S. Dry Cleaning, is aiming to create a nationwide drycleaning chain through acquisitions of profitable, high-volume cleaning businesses.
In July the company completed a $6.1 million initial public offering and is trading on the Over-the-Counter Bulletin Board under the symbol UDRY.OB. The company has also raised $10.5 million in private capital since its inception.
The company said the money will be used “to advance U.S. Dry Cleaning’s plan to be the industry’s first major consolidator creating a premier national brand.”
According to a company fact sheet, the business strategy involves acquiring profitable companies that lead their markets and have more than $5 million in annual revenues.
Acquisitions will be made with a combination of stock and cash. Senior management of acquired companies is expected to remain in place during the assimilation.
“We have a strong business plan to grow rapidly by acquiring profitable drycleaning businesses that are number-one in their markets throughout the United States, ” said Robert Y. Lee, CEO, director and co-founder of U.S. Dry Cleaning. “Consolidation will create accretive value through economies of scale, operational synergies, best practices and professional management of the highest quality. ”
Over the last year and half, U.S. Dry Cleaning completed acquisitions with combined annual revenues of about $10 million.
The company’s web site, www.usdrycleaning.com, lists 13 Young Laundry and Dry Cleaners locations in Hawaii and 18 locations in California under Roadrunner Cleaners and Boston Cleaners.
Last month the company announced a purchase agreement to acquire a Fresno, CA-based drycleaning firm that has 18 stores around Fresno and two in Arizona. The acquisition would increase the company ’s annualized revenue by $6.5 million. Three previous acquisitions established annual revenues of $10 million.
U.S. Dry Cleaning expects that the acquisition will be completed before the end of October 2007.
The transaction includes four affiliated companies owned and operated for two generations by Fred Jones and his son, Tom, with daughter Melinda Brooke operating the stores in Phoenix and Tempe, AZ. The businesses are Team Enterprises, Inc., Bell Hop Cleaners of California, Inc., Team Equipment, Inc. and Fabricare Services, Inc.
Operating under the trade names One Hour Martinizing and Regency Cleaners, the chain has a base of customers served by an infrastructure of office, management, training and operations staffs. In addition, the business uses the Green Earth cleaning process.
Under the purchase agreement, U.S. Dry Cleaning would acquire the business for $6.1 million, half of which would be paid in the form of shares of U.S. Dry Cleaning common stock.
Lee said that Tom Jones would stay on for three years to help build the market, increase revenue and profitability, and integrate the company into U.S. Dry Cleaning's national strategy.
“We intend to rapidly become the country's premier drycleaning chain, benefiting our employees and communities through outstanding service and providing the opportunity to participate in the growth of a public company, ” Lee said.
U. S. Drycleaning will identify acquisition candidates by revenue stream, location, market share, quality of work, productivity and customer loyalty. The company believes that the industry is entering a consolidation phase as older proprietors and recent inheritors seek returns on long-standing businesses.
With management of acquired companies remaining in place, U.S. Dry Cleaning said it can create value through economies of scale, best practices and sophisticated management. Revenues could be increased through add-on services such as expanded pick-up and delivery, on-site alterations, household service beyond clothing, smoke restoration, shoe repair, etc.
One of the two co-founders of the company is experienced in the drycleaning business. The other has extensive experience in retail consolidation.
Michael E. Drace, the company’s chief operating officer, has been in the industry since 1969 and was previously president and principal shareholder of Young Laundry and Dry Cleaning in Honolulu, HI.
Lee, the company’s CEO, previously led the growth of Video City, a retail video store consolidation, from an 18-store chain to a multi-state operation owning and managing 350 corporate stores and 150 franchised stores nationwide.
“Our management team is highly experienced in retail consolidation, and we believe that the ‘first mover’ consolidating any market is able to acquire market-leading businesses at the most favorable prices, ahead of potential competition, ” Lee said. “We believe it is the early stage of consolidation that reaps the greatest financial rewards for all parties. ”
