Les Schwab sold to California investment fund, Meritage Group

Les Schwab Tire Centers has reached a deal to sell the company to an investment fund in California called the Meritage Group, ending local family ownership of one of Oregon’s best-known businesses.

Bend-based Schwab Tire announced it would seek a buyer for the 68-year-old business in December, citing the difficulties of running a business in its fifth generation of family ownership. Tire baron Les Schwab started the business in his hometown of Prineville in 1952 and grew it into one of Oregon’s largest companies with nearly 500 stores in 10 western states, and annual sales of $1.8 billion.

The business remained in Schwab’s family after his death in 2007.

When Schwab announced its sale plans last year, Bloomberg reported the owners hoped for $3 billion in the deal. Schwab and Meritage did not report terms of Tuesday’s transaction but said the current management team will remain in place and Schwab will continue operating as it has.

“We see Les Schwab Tires as an ideal investment,” said Aubrey Barth, Meritage’s managing director, in a statement. “The company’s exceptional employees and programs, strong financials, and respected, customer-focused brand set it up for success for years to come.”

Meritage’s founder, Nat Simons, is a billionaire investor and climate change activist. Simons helps run a number of investment funds in addition to Meritage. It wasn’t immediately clear how Les Schwab fits into his investment thesis.

Meritage (rhymes with “heritage”) manages more than $10 billion in assets. It has large holdings in Google, Charter Communications, Microsoft, Salesforce and Sherwin Williams Co., among others. It also owns Portland beverage distributor Columbia Distributing.

“Meritage Group has a history of preserving culture and values while growing its companies with investment over time. This is a great fit, and aligns well with Les’ vision and all we have built together,” Schwab CEO Jack Cuniff said.

Les Schwab Tire Centers

Founded: 1952.

Headquarters: Bend.

Ownership: Privately held by Les Schwab’s grandchildren and their families. They company has agreed to sell to California investment firm the Meritage Group. They expect to close the deal by the end of the year.

Stores: 500 in Oregon, Washington, Alaska, Idaho, Montana, California, Nevada, Utah, Colorado and Wyoming.

Employees: 7,000

Annual sales: $1.8 billion.

Schwab Tire’s sale is the latest in a succession of large, Oregon-based businesses to sell. Precision Castparts, Mentor Graphics and Vigor Industrial, among many others, have found new owners in the past few years.

Oregon now has few large, locally owned companies based here. It’s a trend that has worried economists for years, fearful that out-of-state owners would cut satellite operations in a downturn before trimming their headquarters.

When it announced sale plans, though, Schwab maintained any new owner would keep the company together and retain its Bend headquarters and Prineville distribution center.

“As our family grows and ages, it has been very important to us to remain committed and aligned behind our grandfather’s vision,” the Schwab family said in a statement Tuesday. “While it was hard to make the decision to sell the Company, we are very confident Meritage Group will continue that commitment and alignment, and will build on all we have accomplished over the past 68 years.”

Meritage has a fairly low profile as an investment firm with little public record of its investment philosophy or management practices. If Schwab had sold to a competitor the new owner might have consolidated operations, cutting jobs at the company’s Bend headquarters and combining its Prineville distribution center with facilities elsewhere.

Investment firms like Meritage could seek profits from Schwab by putting more money into growing the business, by changing operations or by cutting costs. Meritage said Tuesday it plans to invest in Schwab but Dave Garten, who teaches business strategy at Portland State University, said it’s impossible to gauge the new owner’s intentions without knowing more about its objectives and methods.

“Financial investors have a lot of different motives,” Garten said. “So we’re spitballing possibilities but we don’t really know yet.”

Ed Maletis was part owner of Columbia Distributing, and served on its board, when the Portland company sold to Meritage in 2012. On Tuesday, he said Meritage proved a good owner for his old company and Maletis said he expects it will treat Schwab the same way, leaving management and operations intact.

“What Meritage brings as an owner is a significantly larger checkbook should the opportunity or need arise for further growth and/or acquisitions,” Maletis wrote in an email. “That has been a…

Read More: Les Schwab sold to California investment fund, Meritage Group

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