Costco Wholesale Corp acquires Innovel Solutions from Transformco for US$1bn

USA – American multinational retailer, Costco Wholesale Corporation has acquired Innovel Solutions, a middle mile and final mile delivery and installation business owned by Transformco Holdco, for US$1 billion.

Innovel was a subsidiary of Transform Holdco, which operates Sears and Kmart stores. Innovel operates 11 distribution/ fulfillment centers and over 100 final-mile cross-dock centers, with over 15 million square feet of warehouse space.

Innovel has for decades provided final mile delivery, complete installation and white glove capabilities for “big and bulky” products across the United States and Puerto Rico. Costco has been a customer of Innovel since 2015.

As part of the terms of the acquisition, Costco has entered into a long-term commercial arrangement to provide Transformco warehousing, delivery and installation services to Sears and Kmart members.

Costco has also agreed to retain over 1,500 Innovel employees on a go-forward basis.

Additionally, Costco will enter into a long-term commercial agreement whereby the retailer will leverage Transformco’s Service Live platform to source technicians for complex installations across the country.

“We have had a great relationship with Innovel and share a philosophy of taking care of our members. We believe the acquisition will allow us to grow our Ecommerce sales of “big and bulky” items at a faster rate.” Craig Jelinek, Costco’s CEO said.

Costco currently operates 786 warehouses, including 547 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 29 in the United Kingdom, 26 in Japan, 16 in Korea, 13 in Taiwan, 11 in Australia, two in Spain among other countries.

This transaction is expected to provide Innovel and its employees with the resources to continue to build out a logistics platform as well as allow Transformco to repay all of its non-real estate debt. 

Transformco said that the transaction will enable the retailer to pursue other transformative actions to fully leverage its core assets and capabilities to realize maximum value for all stakeholders.   

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Over the past year the retailer said that its associates have worked to restore vendor relationships and to maintain financial support from its lenders with a focus to return the company’s retail operations to profitability. 

Despite these efforts, the support Transformco received fell well short of its needs. As a result, the Sears and Kmart store formats have experienced declining sales and continued losses, consistent with trends for department store and other legacy retailers.

Transformco said that it now plans to further streamline retail operations over the next several months and focus on those stores with a strong record of success. However, the company will reduce its store footprint.

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