Greenhouse Grower caught up Friday with Jerry Halamuda, the president of Color Spot Nurseries, who discusses the deal that’s in the works between Color Spot and Hines Nurseries.
GG: Our understanding is Color Spot Nurseries has been pursuing Hines for quite some time. How long has Color Spot been pursuing Hines and what factors came together to make a transaction possible?
JH: Color Spot has not really been pursuing Hines, but pursuing certain Hines facilities to lease for many years. We have recognized that the cost to capitalize a functional nursery operation has escalated over the past 10 to 15 years–land, grading, infrastructure, facility improvements, etc. We have been successful at finding companies that wanted to abandon their business model and rent or sell their physical facilities. We have found this is many times more cost effective than pursuing a buy-and-build model from a cost, capital usage and return standpoint.
GG: What made Hines and its locations such an attraction to Color Spot? How do the Arizona, California and Texas nurseries acquired fit into the big picture for Color Spot?
JH: Our business is segmented somewhat equally between what we call our Western and Southwestern Divisions. In our Western Division, we service the greater California, Arizona, Nevada and New Mexico markets. So the facility we will lease from Hines in the west is in Northern Arizona and will help us service those customers closer to market. Obviously, the Katy/Houston facility will assist us in servicing our overall Texas, Oklahoma, Arkansas and Louisiana markets.
GG: Color Spot’s position in the market is already a very strong one. What do you anticipate this acquisition doing for Color’s Spot’s market position?
JH: We are a regional business and work with our customers to maximize opportunities in those regional areas. Opportunities exist in many product lines that we currently do not supply, as well as further penetration in those we do produce. In addition, we do not currently see customer expansion taking place. However, as the economy recovers, we will see increases in retail volume, as well as new store growth. We are a 30-plus-year-old business looking for long-term, stable expansion.
GG: Anything you’d like to add about the pending transaction?
JH: There were a dozen large nursery companies looking to lease these two facilities. We were lucky to be considered. This is not a completed transaction. We will keep you posted as we see this coming to completion.