POTOSI, Mo. (Sept. 12, 2002) — For nearly four decades, Bob and Juanita Purcell built their family business into one of North America's largest independent retail and commercial tire dealerships.
Upon deciding it was time to sell, they didn't relish the idea of turning over their dealership to just anybody.
With a desire to take care of the people whose efforts helped make Purcell Tire & Rubber Co. so successful over the years, the Purcells have transferred 100-percent ownership of the Potosi-based dealership to their employees via an Employee Stock Ownership Plan (ESOP).
“Every employee now has a personal stake in our company's future, and we believe the ownership culture this will create will greatly benefit our customers,” said Mr. Purcell, who will remain with the firm as president. Juanita Purcell also continues as executive vice president.
The Purcells would not give exact figures, but said the value of the transaction was “close to $100 million.”
“We've been in the business for a long time, Juanita and myself,” Mr. Purcell said. “One thing we wanted to see was the company survive, be successful and go on down the road. We live a pretty conservative life. We don't have lots of desires. We don't spend lots of money.
“We wanted the company to continue. We looked around for ways to make that happen. We thought transferring the company to the employees would be the best way.”
Founded in 1935 by Mr. Purcell's father, the dealership ranks as North America's third-largest commercial tire dealership, is one of the largest medium truck, light truck and OTR tire retreaders, and is the continent's 23rd largest independent tire retailer. It projects total revenues of $166 million in 2002.
The company has 67 outlets operating in 38 states including 32 retail stores, 17 combination retail/commercial outlets and 18 commercial locations.
Sixty-five percent of sales come from its commercial/retreading operations.
Purcell Tire employs 1,000 people, most of whom are vested and eligible for the ESOP, which Mr. Purcell said was the “best vehicle” for keeping the company in the hands he wanted.
Over time, Mr. Purcell explained, all the employees will be eligible to participate in the ownership plan.
The Purcell ESOP is set up as a trust. The company being sold loans the value of the company to the trust, which buys shares for the shareholders.
According to Chuck Pilliod, Purcell's vice president of finance, an ESOP offers some advantages. Most noteworthy is that when an ESOP owned company buys another company that firm can, in turn, become an ESOP and the ESOP status allows the purchase to be a tax-free exchange.
An ESOP can be financed by a bank and the Purcells had one lined up to do so. In the end, however, they chose to hold the notes themselves, and thus are personally financing the deal.
Mr. Purcell said he and his wife are not concerned whatsoever about self-financing. In this case, they know exactly who the buyers are, and they also know the buyers have a lot to lose, too.
“It is one of the best employee benefit programs that there is,” he said. “They're going to be motivated by owning the company. They'll also be motivated because they're working for themselves to a degree.”
Mr. Pilliod said the Purcell's have been working on the deal for a couple of years and that the timing—the actual consummation of the deal happened Sept. 10, the Purcell's 47th wedding anniversary—was tax-driven.
Mr. Purcell said they had explored other means of selling, such as an initial public offering and an outright sale.
“This package and this approach was the best way to go,” he said.
Mr. Purcell noted that some competitors wrongly have told customers the dealership was “selling out.”
Partly because of that, he said, the company's store managers have been asked to contact customers and “explain what it is before someone else gets a chance to get in and put their spin on it.”
Mr. and Mrs. Purcell are staying on with the company because the ESOP trustee insisted on that, Mr. Purcell said.
“We'll still be very active,” he said. “Juanita and I will be the board of directors. The technical part of it will be if we need to do something outside of the agreement, then we have to get a third director in our company.
“We plan to stay as involved as we were. It's as necessary now as it was previously. A leopard doesn't change its spots.”
Bob, 66, said that Juanita, 65, has completely recovered from heart problems earlier this year and the two are ready to face the future together.
“I'm in good shape, she's in good shape. We're still active,” he said. “This was not an exit strategy.”