Consultant John Bambach, who is overseeing the company’s fate, said selling off its assets is ‘a poor alternative’ to finding a buyer who will put its people back to work.
By Matt Skoufalos | February 12, 2019
Long before last week’s closure of DuBell Lumber, the company was trying to broker a deal that would salvage the 97-year-old enterprise and the jobs of its 157 employees.
About 140 of them are still in limbo, much like the business itself, which is trying to stave off the liquidation of its assets amid talks with multiple prospective buyers.
“We’re hoping to have something in place within the week so that employees who did not find jobs with another employer could land with a new buyer,” said John Bambach, the company’s chief restructuring officer.
Bambach is the managing partner at Bambach Advisors, a corporate restructuring firm that was brought in January 2 to oversee DuBell’s realignment.
A previous deal that was being brokered with the assistance of former CEO Gene DiMedio, Sr.—not to an ownership led by him, as was previously reported—fell through at the eleventh hour last week, leading DuBell to shutter its seven locations.
Sources familiar with terms of the deal say the potential buyer backed off, fearing too many key staff had departed the company; others said a key piece of funding fell through at the last minute.
DuBell is currently working with a skeleton crew of less than 20 employees to fulfill as many existing orders as it can.
In addition, Bambach said there’s a few hundred thousand dollars worth of prepaid jobs remaining, and that crew is working to ship out everything from its onsite inventory as quickly as possible.
“I’m getting a lot of calls,” he said. “If I were a consumer, I’d be doing the same thing. It’s something that we want to work through, and try to take care of as many people as we can.”
Until any deal is brokered, the fate of 140 former DuBell employees still hangs in the balance.
Whether they’re offered new jobs or even any kind of compensation package in the absence of work is “a chicken-and-egg question until we know what the assets are coming in and what is owed to secured parties,” Bambach said.
“Everybody I met at DuBell, they were making the best of it,” he said. “They were good people.
“We’re still trying our best to get an experienced person in there to move into all locations,” Bambach said. “That’s what my intent is.”
But the undoing of DuBell’s fortunes may have begun with the hostile takeover of the family business from within. Former employees, who spoke on condition of anonymity, pointed to the public removal of former CEO Gene DiMedio, Sr. as its Rubicon moment.
Security officers “physically removed him from the building like a criminal,” one said.
“It happened in front of customers and employees,” said another.
Losing DiMedio, Sr., who’d run the business for 45 years, in such a fashion, set a sour tone among some staffers for the installation of new CEO Michael L. Sullivan.
(Reached for this story, Sullivan declined comment, citing the conclusion of his tenure with the company and a wish to not complicate its future prospects.)
But it was under Sullivan, who had never previously managed a lumber business, that DuBell began to pursue the consolidation of its operations at a site on Mt. Ephraim Avenue in Camden City.
DuBell’s application to the New Jersey Economic Development Authority (EDA) stated that without the assistance of some $18 million in tax credits, it could pursue a cheaper headquarters in Delaware, taking 92 jobs with it.
That strategy didn’t seem to make sense for a building company with nearly a century’s worth of business in seven South Jersey locations, but EDA approved the proposal nonetheless.
(That application alone, and the acquisition of the proposed site of that headquarters, kicked out two viable Camden businesses there.
(The deal was never consummated, however, and the tax credits are set to expire in the summer.)
Along the way, spending picked up under Sullivan, so much so that DuBell, which had navigated the economic downturn of 2008 without layoffs, was locked into what one longtime former employee termed “an unsustainable debt structure.
“He acted like it was a turnaround,” the employee said. “There was nothing to turn around.”
That sent red flags to its creditors sufficient for them to enact financial oversight of the business. In doing that, DuBell lost the flexibility to reinvest in its inventory, which pushed the company to the brink.
“In this industry, you don’t pay, you don’t get,” said one lumber expert. “You don’t get, you don’t sell, and inventories turn over pretty quickly.”
Sullivan was replaced by John Cusick in August 2018, but by then, the circumstances that had eroded the company’s financial position had long taken root.
“Nothing happens overnight,” said Bambach, who was brought in January 2 to restructure the business.
“Unfortunately, it got to the point where the vendors were starting to shut them down, the bank was not willing to extend any more risk, and the company was not performing,” he said.
Bambach described Cusick as having been “absolutely fabulous with managing what he was handed,” noting, “the problems were well before that.
“But the intent was never to have a liquidation,” Bambach said.
“The intent all along was to sell the business to a company that was in the [lumber] business so the customers wouldn’t get hurt, the employees wouldn’t get hurt, and there was a way forward.
“That was the intent of John Cusick; that was the intent of the shareholders,” he said.
So far, DuBell has rejected offers from suitors seeking to purchase individual divisions of the company, the better to preserve “the highest recall rate of employees who are still available,” Bambach said.
“My priority, the best case, is to try to get back as many jobs as possible by finding a buyer,” he said. “Liquidation is a poor alternative.”
Bambach estimated that as soon as next week, DuBell could come to terms with an existing lumber business to acquire all its assets and rehire as many of its former employees as possible.
Those workers represent the bulk of value to any potential buyer as much as any of the company’s physical assets.
A source familiar with last week’s deal agreed that the biggest turning point of any sale remains the combined knowledge and experience of DuBell workers.
“You can order lots of product,” the source said. “You can create new processes. But there’s people who’ve been there 38 years. You can’t get that kind of experience elsewhere.”
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