Strober acquires drywall specialty distributor

Home Channel News, May 1, 2000

Purchase of Arkay Building Supply gives pro dealer access to Mid-Atlantic markets

BROOKLYN, N.Y -- Strober Organization's "southern strategy" gained momentum after the 29-yard pro dealer agreed last month to acquire the assets of Arkay Building Supply.

Arkay sells to builders and remodelers in the Baltimore-Washington market from its two yards in Catonville and Gaithersburg, Md. The company, which generated $29 million last year, also operates three truss and wall panel plants in New Jersey and Pennsylvania.

The growth-minded Strober's farthest penetration south prior to this deal was Newark, Del., according to chairman and CEO Fred Marino.

Strober had devised an expansion strategy several years ago that called for the company to be serving pro customers from Virginia to northern New England. Marino told NHCN that the farthest south he thinks his company will venture would be into the Fredericksburg-Richmond, Va., area. He also noted that the next acquisition his company is likely to make would be a conventional lumberyard dealer in the Middle Atlantic states.

In 1999, Strober's sales rose a robust 17.6 percent to $400 million, partly on the strength of its 1998 acquisition of the 14-unit Haddonfield Lumber, which added more than $160 million in sales to its balance sheet. That type of multi-unit operation has become far more appealing to the larger pro dealers in the industry that, more than ever, are jockeying for position -- and for companies still available to be purchased.

"There's more value in acquiring larger than smaller companies," Marino said. "And there is going to be a point in time when businesses of smaller size will be worth significantly less than they are now because of this. So when someone like us purchases an individual yard, it will be incidental to our business."

With Arkay, though, Strober gained a company that specializes in selling drywall, steel framing, acoustical products and insulation. Marino noted that Strober has been successful at selling "a very broad range of building products, far more so than many pro dealers."

All 60 of Arkay's employees will be offered positions in the newly formed company, to be called Arkay-Strober Building Supply. Tom Ciampaglio, Arkay's vp, will become vp of the new entity. Its former president and principal shareholder, Russell Smith, will stay on for a while as a consultant.