Investors Buy Furniture Retailer RB for $46 Million

RB Industries, which runs 51 retail furniture showrooms in the West and has had a checkered performance of late, agreed Monday to be bought for $46 million by an investor group formed by the Montgomery Securities investment firm in San Francisco.

Under the definitive agreement, RB shareholders will receive $12 a share as part of a merger into Cahasa Acquisition Corp., a company formed by Montgomery and other investors solely to buy RB.

Among those selling their holdings will be founders Joseph Sinay and his brother, Samuel Sinay, as well as Solomon Lew, an Australian investor who with affiliates holds 34% of the company and who has been attempting to gain control of it.

No Change in Merchandise

Jack G. Levin, a general partner in Montgomery Securities, said the company will continue as RB Industries. “We don’t anticipate changing the merchandise mix,” he said, adding that the new owners intend to take advantage of RB’s unused manufacturing capacity to make more of the chain’s upholstered furniture to improve profit margins.

James S. Schmitt, an investment analyst at Westcountry Financial in Somis, Calif., said RB is a worthy acquisition target because of its abundant real estate.

The company owns eight stores, has attractive long-term leases on most of the other 43 properties (17 of which are leased from Josam, a partnership controlled by the Sinays) and owns its Irvine headquarters. It also has about 5,000 square feet of space in Century City that it is leasing at well below current market prices, Schmitt said. Much of the company’s land is in California, where RB has 34 stores.

RB’s board unanimously approved the transaction with Cahasa after Prudential-Bache Capital Funding issued an opinion that the deal was fair to RB shareholders. In July, RB had authorized Prudential-Bache to explore ways to achieve maximum value for shareholders.

Retreat From Texas

Joseph Sinay founded RB in 1950 with a store on Western Avenue in Los Angeles. The company had 10 stores by 1965, when it embarked on a rapid expansion. In the early 1980s, the company entered the Texas market “just at the wrong time,” Schmitt noted. Two years ago, RB retreated from that depressed market, and its earnings have suffered from writeoffs on leases there.

The company’s results also were hurt by losses at Cousins Home Furnishings, a San Diego company partly owned for a time by RB.

For the year ended June 30, RB reported a loss of $4.7 million on sales of $99.6 million. That contrasted with a profit of $4 million on $103.6 million in sales the year before.

In April, RB inaugurated an advertising program touting its furniture prices as the lowest in town. Under the current setup, RB stores have attached warehouses, but the company recently opened a 260,000-square-foot warehouse in City of Industry and plans to centralize much of its distribution.