Les Schwab Tire Center has signed a deal to sell the company to an investment fund in California called the Meritage Group, ending ownership of a local family of one of Oregon’s best-known businesses.
Bend-based Schwab Tire announced plans to sell the 68-year-old business in December, citing the difficulties of running the business into its fifth generation owned by the family. Tire Baron Les Schwab began business in his hometown of Prineville in 1952 and grew it to one of Oregon’s largest companies in 10 western states with nearly 500 stores and annual sales of $ 1.8 billion.
After his death in 2007, the business remained in Schwab’s family.
When Schwab announced its sales plans last year, Bloomberg expected the owners $ 3 billion in the deal. Schwab and Meritage have not divulged the terms of Tuesday’s transaction, but said the current management team will remain unchanged and Schwab will continue to operate.
“We see Les Schwab Tires as an ideal investment,” Aubrey Berth, Meritz managing director, said in a statement. “The company’s exceptional staff and programs, strong financial and respected, customer-centric brand set it up for success for years to come.”
The founder of Meritz, billionaire Nat Simmons, is a billionaire investor and climate change activist. Simmons helps run a number of investment funds in addition to Meritage. It was not immediately clear how Les Schwab fit into his investment thesis or what the deal would mean for the company’s operations and employees.
Meritage (sung with “Heritage”) manages more than $ 10 billion in assets. It has major stakes in Google, Charter Communications, Microsoft, Salesforce and Sherwin Williams Company. It also owns Portland beverage distributor Columbia Distribution.
“Market Group has a history of preserving culture and values while developing its companies over time. It is a great fit, and aligns well with Lace’s vision and we all have built together, ”said Schwab CEO Jack Cuniff.
the headquarters: Bend.
Ownership: Held privately by Les Schwab’s grandchildren and their families. Those companies have agreed to sell to California investment firm Meritrat Group. They hope to close the deal by the end of the year.
Store: 500 in Oregon, Washington, Alaska, Idaho, Montana, California, Nevada, Utah, Colorado and Wyoming.
annual sales: $ 1.8 billion.
Schwab Tire Sales is the latest in succession to sell to large, Oregon-based businesses. Precision CastParts, Mentor Graphics and Wager Industrial, among many others, have found new owners over the years.
Some of Oregon’s now large, locally owned companies are based here. It is a trend that has worried economists for years, fearing that out-of-state owners would cut satellite operations in the recession before trimming their headquarters.
When it announced sales plans, however, Schwab said that any new owners would keep the company together and maintain their Bend headquarters and the Prineville distribution center.
“As our family grows and ages, it is very important for us to be committed and align behind our grandfather’s vision,” the Schwab family said in a statement. “While the decision to sell the company was difficult, we are confident that the Meritors Group will continue to make that commitment and alignment, and that we have accomplished in the last 68 years.”
Meritz has a fairly low profile as an investment firm with very little public record of its investment philosophy or management practices. If Schwab had sold out to a competitor, the new owner might have consolidated operations, cut jobs at the company’s Bend headquarters and combine its Prineville distribution center with other facilities.
Investment firms such as Mercit can benefit from Schwab by investing more money in expanding businesses, changing operations or cutting costs. Meritz said there are plans to invest in Schwab on Tuesday, but Dave Garten, who teaches business strategy at Portland State University, said it is impossible to ascertain the new owner’s intentions without knowing more about his objectives and methods.
“Financial investors have a lot of different objectives,” Garten said.
Neither Schwab nor Meritz said anything about the structure of the deal. Past sales of Oregon’s major businesses, notably GI Joe’s, were financed with debt – which sent the company into bankruptcy when the Great Recession hit.
Schwab Tire postponed its sales plans in June citing the coronovirus epidemic. And although the virus is still raging, financial markets have unexpectedly strengthened and corporate dealing has continued with the apas.
Even as his tire business grew, Les Schwab followed his old school business practices. The company gives half of the profits to its employees from each store (Schwab said Tuesday’s profit-sharing will continue) and only managers from within the company are hired. The tire chain has expanded to Southern California and as far east as Denver, but all of its products still pass through its Prineville warehouse in the High Desert, 36 miles northeast of Bend.
Tire jockeys still exit the service bay when the car pulls into the parking lot to greet customers. The company often fixes flats for free, anticipating people will return when the time comes for their new tires.
Les schwab timeline
1917: Les Schwab born in Bend. She was schooled at Brooks Schnallon Logging Camp, in a railroad boxer with severed holes in the side. He had three newspaper delivery routes, picking up papers with a log train and delivering the Oregonians, The Oregon Journal and the Merge News Telegram in the afternoon.
1936: Married at age 18 to Dorothy Schwab.
1952: Les Schwab, 34, buys an OK rubber welder tire shop in Prineville with a loan of $ 11,000 from his brother-in-law and takes $ 3,500 from selling his home and borrowing on his life insurance. At the time, Schwab later said, he had never fixed a flat tire. Sales increased to $ 155,000 from the following year. Within three years, Schwab had Les Schwab Tire Centers in Bend and Madras.
1971: Son Harlan Schwab died at the age of 31 after being buried in a car wreck.
1980: Schwab Tire has 71 stores.
1983: Phil Vick has taken over as president of Schwab Tire but Les Schwab is closely involved in the business.
1986: Schwab Tire opens its 100th store.
2004: Schwab tires make $ 1 billion in annual sales.
2005: Les Schwab’s surviving child, Margie Denton, dies of cancer.
2007: Les Schwab died at the age of 89.
2008: Schwab Tire moves its headquarters from Prineville to Bend.
2016: Dorothy Schwab died at the age of 98.
2019: Schwab Tire has hired Goldman Sachs for broker sales of the business.
Schwab himself vowed that he would never sell the business and hoped that he would not have a successor either.
“The company is not for sale,” Schwab told The Oregonian in 1997, “It will be bigger and better than ever, and will continue to provide opportunities for young people to succeed. All the stock will remain in our family.”
However, Schwab had two children before he died. And although some of his successors serve on the board of a privately held company, none hold executive positions with the company and none of their four grandchildren live in Oregon.
When his widow, Dorothy Schwab, died in 2016 at the age of 98, 17 of her descendants were direct descendants.
Clarity: This article originally described Meritage as a hedge fund, which describes Bloomberg and other financial publishing firms. But it is unclear whether Meritage, in fact, hedges its investment. Therefore the details of the firm have been changed.