Cotter Merges With Servistar

The world's largest hardware wholesaler, Cotter & Co., has agreed to merge with number three, ServiStar Coast to Coast Corp., creating a new co-op called TnrServ Corp.

Combining nearly 10,500 independent retaifer members and initial annual sales of $4.5 billion, the megamerger marks perhaps the most serious challenge in any industry small businesses have presented to the onslaught of big discounters.

"By consolidating our operations we expect to give the owner/members better prices, better services and longterm shength in the wholesale indust4/," says Dan Cofter, president and ceo of Cotter & Co., and designated chairman and ceo of TruServ. Servistar pres. and ceo Paul Pentz will serve as TruServ pres., c.o.o. and board member.

The combined senior management will continue to report to a board of retail members<ight directors nominated from Cotter's board and seven from Servistar's.

As soon as all regulatory requirements are met in about mid-month, a proxy vote with merger document and background material will be mailed to the two co.ops' members, who would exchange common and preferred stock in their co-ops at par value for stock in the new company on a dollarfor-dollar basis.

Under the proposed plan, TruServ's official headquarten will be at Cotter's Chicago, Il., headquarters, although several of TruServ's combiired businesses, including its $l billion lumber business, will be managed from Servistar's Butler, Pa., offices. The new company's 6,0(X) employees will be cut to about 3,800, and combined distibution centers will be consolidated from 15 to 12.

TruServ co-op members would keep their individual store names, but Servistar members will have to convert to Cotter's pricing system. Some overlap of store service area will also result, but no existing stores will be forced to relocate or change names.

Still, some members likely will be upset with the merger, and as a result Cotter and Servistar expect about 2.57o of their combined menbership to drop out. *There are going to be some members saying, 'Geez, maybe this isn't in our own interest,"'says

Mike president of competing co-op Hardware Wholesalers Inc., which hopes to start enlisting disgruntled Tnre Value merrbers.

McClelland,

Helping members understand the benefits of the merger is a new responsibility for Cotter c.o.o. Steve Porter, one of the key authors of the TruServ plan, who will serve as a consultant to the new company through the tansition.

Key to the plan is a $40 million fund created to he$ members to complete store upgrades and technological improvements, smoothing necessary transitions and making the stores more competitive.

The fund has three components:

(l) reitnbuning Servistar members for costs of switching over to Cotter's pricing system and vendors; (2) defraying the costs of retail automation or software enhancements, and

(3) making available $16 million for updates, improvements or opening a new store.