The Oreck family is rallying to take back their namesake vacuum-cleaner company from private equity owners in a deal valued at $22 million—a price that founder David Oreck hints is cheaper than what he sold the business for a decade ago.
Oreck, 89, has never stately publicly how much he profited from the 2003 sale of his company. But while his three sons lead the charge to buy the company’s 96 retail stores and 250-worker manufacturing plant in Tennessee out of bankruptcy, Oreck pointed out that the value of the business has certainly fallen in recent years.
“It obvious that it’s worth less today,” he said. “When I sold the company, it was prosperous, [its profit] was growing and it had virtually no debt, so it was a very healthy company.”
Asked whether his family would be buying it back at a discount, he replied: “It’s not too hard to put that together.”
Oreck Corp. filed for Chapter 11 bankruptcy protection on May 6, saying that the business has struggled against competitors and that sales have declined since 2010. The company has changed hands since the Oreck family sold it in 2003, and it’s now controlled by Black Diamond Commercial Finance LLC.
On Thursday, Oreck executives asked a bankruptcy judge to designate the family’s offer at the lead bid at a July 8 auction, according to papers filed with the U.S. Bankruptcy Court in Nashville, Tenn. Under the proposed sale timeline, other buyers would have until June 28 to put in rival bids.
Oreck officials said in court papers that a quick sale “will restore confidence on the part of consumers that they can purchase an Oreck vacuum cleaner without concerns regarding replacement parts, warranty obligations and maintenance. Employees, suppliers and retailers will be able to depend on [the new] Oreck as an economically viable and competitive enterprise.”
If the Oreck family’s offer wins, Oreck’s high-end vacuums could start disappearing off the shelves of big-box retailers. Oreck has been critical of the company’s latest shift away from selling the products through its own stores, which he said offer good customer service and give consumers a place to take their broken models for repairs.
“The intention is to move away from a big-box strategy and move to a strategy where we have channels that give us more direct access to our customers,” explained Tom Oreck, who rounded up family members to put together the offer, which includes $14.5 million in cash and the assuming of several million dollars worth of the company’s liabilities.
David Oreck said that the company’s leaders shouldn’t have focused so much on getting younger consumers to purchase its vacuum cleaners. The lightweight, sturdier and comparatively more expensive models are designed for older and middle-to-upper-class buyers, he said.
David Oreck founded the company in 1963 when many vacuum cleaner models were bulkier and heavier. The product caught on quickly with hotels, and he later began to target the residential market.
Oreck goes into more detail about the company’s latest missteps in his recent book, “From Dust to Diamonds,” which, according to a publicist’s pitch, chronicles how “venture capitalists are robbing American companies and unnecessarily contributing to the continued loss of American jobs.”
“If we prevail, I think the chances of turning this around are very good,” Oreck said.
Write to Katy Stech at [email protected].
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