A marriage of convenience

RODERICK MCQUEEN September 4 1978

A marriage of convenience

RODERICK MCQUEEN September 4 1978

A marriage of convenience


For its 25th anniversary celebrations this year, Simpsons-Sears Ltd. tried to assemble staff recollections about its beginnings. Among those interviewed was Chairman Jack Barrow, in 1952 a buyer for the Simpsons, Ltd. mail-order division which formed the basis of Simpsons-Sears. What, asked the archivists, was his reaction when Simpsons-Sears was formed? “For the life of me,” he replied, “I can’t recall.” What about his reaction when named chairman in 1966? “1 can’t remember that, either.” Eyes twinkling behind spectacles almost too large for his full face, he chuckles as he tells the story and says: “I think 1 have a little sympathy for those Watergate witnesses now, because 1 am amazed at how little I remember about some of those things.”

What is clear in his mind, however, is the growth achieved from first-year sales of $112 million. In mid-August, 25 years, 62 stores and approximately 850 catalogue

sales offices later, has come the announcement that Simpsons-Sears and Simpsons, one of its original founding partners, will merge. With expected annual sales of $3 billion, the new firm will be Canada’s second largest merchandiser, bigger than Canada Safeway Ltd. and Dominion Stores Ltd., currently two, three, topped only by the giant George Weston Ltd. Every man, woman and child in Canada will spend an average $130 in a Simpsons or Sears store or catalogue this year.

The chairmen of the two firms, Barrow at Simpsons-Sears and G. Allan Burton at Simpsons—men as different as the firms they lead—will preside over the merger that’s been on both corporate minds for at least five years. Approved by both boards August 16, with the Simpsons-Sears afternoon meeting taking a perfunctory five minutes, they will steer the merger through shareholder and Foreign Investment Review Agency approval. If the

shareholders respond as they did when Simpsons-Sears was first formed approval will be easy. When the call went out for questions at that meeting, there were none.

It is unlikely, however, that either man will put his own stamp on the new firm for long. At 64, Barrow retires next year. Burton, at 63, who follows his elder brother and father at steering Simpsons this century, has already begun to turn over control to his nephew, Ted, 43, president since 1976. While there is yet no clear leader for the new giant in Canadian retailing, there will likely be no more than a bit of shuffling at the top. There is, however, agreement on one point: While the name Simpsons has recently disappeared at Simpsons-Sears on everything from bags to storefronts, it is not about to go through another disappearing act. Simpsons, the name made famous by a Scottish immigrant’s first dry goods Toronto store in 1872, opened its 21st store in St. Bruno, Quebec, last month. Both Simpsons and Sears will be operated as separate divisions.

Admittedly, there is still some headscratching going on, even within. “I think,” says Barrow, “the press release attempted to emphasize the fact that we’d continue to operate as separate divisions of a merged company,” then pausing and with the slight smile of a man who doesn’t take himself too seriously, adds: “Whatever that means.”

The seeds for the merger were planted in the initial 1952 agreement between Chica-

go-based Sears, Roebuck & Co. and Simpsons, Ltd. Simpsons-Sears was created to take over the mail-order/order-office business of Simpsons and build stores—but not within 25 miles of Simpsons. It was a decision Barrow still calls “a stroke of genius,” leaving major markets such as Toronto, Montreal, Halifax, London and Regina to Simpsons. “It forced Simpsons-Sears to get out into all parts of Canada* Had that agreement not been there, I guess there was always the danger we’d have clustered around Toronto and Montreal like everybody else did.”

In 1973, the original agreement was altered so each could build in the other’s territory on a one-for-one basis, but Simpsons has fallen half a dozen stores behind Sears’s pace. The merger will end the frictions those negotiations caused. More important, it scuttles any take-over of Simpsons which would have placed an unknown and unwanted partner across the boardroom table from Sears, Roebuck.

Other reasons: a mutual toughening-up for more aggressive competition from both an awakening Hudson’s Bay Co. and a resurgent Eaton’s; making shares of a large merchandising firm available to Canadians since all voting shares of the current Simpsons-Sears shares are held by the founding companies. Simpsons’ Ted Burton puts the reasons simply: “The importance of being

together is greater than the importance of being apart.”

While the specifics of the merger are still being worked out, there will be a sharefor-share exchange, with about 91 million shares outstanding in the new company. Sears, Roebuck will have a 33.7-per-cent ownership of the new company, and be the largest single shareholder although Simpsons people are expected to dominate a new board because of the weight of its 47 million shares in the 91 million.

Most observers see few problems with the necessary approval from the Foreign Investment Review Agency, although FIRA Commissioner Gorse Howarth says the agency will be looking at the application closely, noting that “Sears, Roebuck would have a reduced equity share, but in a much larger business.”

While all this is going on, Canadian shoppers may not notice much difference. Sears will still offer middle-range goods, with the accent on automotive, hardware and power tools. Simpsons’ will stress women’s fashions and higher priced lines. And both are satisfied with the difference they intend to continue. Says Barrow: “Our store buyers wouldn’t know where to go to buy an Yves St. Laurent T-shirt and I hope they never find out.”

“There will be,” says Ted Burton, “quite a difference in management styles. This may give us an opportunity to hone up, if I can use that expression, the management style at Simpsons.” Ted is not in the same mould as his uncle, G. Allan Burton, who became chairman in 1970, or his grandfather C. L. Burton. It was C.L. who, along with others, bought the Robert Simpson Co. in 1929, by beating off U.S. buyers, changed the name to Simpsons, Ltd., and set the style and bearing that to recent times befits eight-foot-wide marble aisles.

It’s a style that’s already changing. In a May speech to analysts, Ted Burton admitted problems and set out the corrective steps. For Simpsons, while it never reached the top itself, there is some pleasurable reward in sharing a profitable piece of the firm that did, Simpsons-Sears, now and for the future.

And perhaps the confusion in names has even been beneficial. Simpsons-Sears is called Simpsons by eastern shoppers, Sears by western Canadians. In some locations, both Simpsons and Sears are cheek by jowl. “From where I sit,” says Jack Barrow, “1 don’t care what people call us, as long as they buy from us.” That, given the size and aggressiveness of the chain, is likely to continue.