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Lumber Liquidators Soars as Founder Plans Take-Private Bid

Matt Townsend

(Bloomberg) -- Lumber Liquidators Holdings Inc.’s founder is working on a bid to take the company private as he urges management to consider options for the chain, including a potential sale.

Thomas D. Sullivan -- who owns about 6% of the company’s shares through his F9 Investments LLC -- said he’s already in talks with private equity and banks about a possible bid for the retailer. If he were successful, he’d be interested in merging the chain with his current company Cabinets To Go, he said in an interview.

Lumber Liquidators shares jumped as much as 17% after the close of regular trading before paring gains.

Sullivan said the retailer and Chief Executive Officer Dennis Knowles have gotten away from the formula of low overhead and big marketing budgets that helped it become a nationwide chain. He took particular umbrage with the company building a new headquarters in Richmond, Virginia.

Spending Money

“They are spending money like crazy,” he said, calling the board and the management “pathetic.”

Lumber Liquidators didn’t immediately respond to a request for comment.

The company, which sells hardwood flooring and other home-renovation products, trimmed its full-year outlook when it reported earnings last month, noting softening customer traffic and an uncertain tariff environment. It now sees same-store sales -- a key gauge for retailers -- as flat for the year. Revenue is expected to grow in the low-single digits.

Management said at the time that “we are actively executing a deep dive into our overall cost structure to identify near-term efficiency opportunities.”

Sagging Stock

Over the years, Sullivan said he’s been approached by private equity about partnering to buy Lumber Liquidators, but opted against that until now when a sagging stock price and complaints from current employees motivated him. The company’s share price is down about 3% this year, even as the wider S&P 500 Index is up 16%.

“I’ve always kind of thought about it, but when I saw the stock so low, I thought something has to happen here,” Sullivan said. A building contractor, he founded the chain in 1994 and was CEO until 2006. He remained on the board until 2016.

If a deal doesn’t take place, Sullivan said he would push for changes, such as boosting advertising and cutting back on corporate expenses.

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To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder

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