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Walker-based Speedrack manufactures racking and storage systems for e-commerce companies, including Amazon.com Inc., it's largest client. Speedrack owner Ron Ducharme recently sold the company to an employee stock ownership plan. (COURTESY PHOTO) Walker-based Speedrack manufactures racking and storage systems for e-commerce companies, including Amazon.com Inc., it's largest client. Speedrack owner Ron Ducharme recently sold the company to an employee stock ownership plan. (COURTESY PHOTO)

Amazon supplier Speedrack Products Group sells to ESOP to preserve local ownership, culture

BY Monday, February 13, 2023 04:02pm

WALKER — Speedrack Products Group Ltd. has become one of the latest West Michigan companies to transition to employee ownership.

The maker of racking and storage systems for the retail and warehousing industries completed the sale at the end of 2022 and transitioned to an employee stock ownership plan structure. Employees were informed last week of the transition and that they had become shareholders.

As owner and CEO Ron Ducharme planned for the company’s succession to new ownership to retire, he opted to create an ESOP to maintain local ownership, culture, management and partnerships with customers and distributors.

“He wanted to keep the culture of the company in place and keep the management in place, so instead of selling to a third party-type company or an equity company, he felt this was the best fit for him and all of the employees,” President Eric Quist told MiBiz. “Probably most important for Ron was he wanted to reward the employees for years of dedication and hard work. It’s a great transition for just everyone involved.”

The company issued 500,000 shares at no cost to employees that they can sell when they turn 65 or when they leave the company. They are paid for the shares over a five-year period, said CFO John O’Brien. Employees 21 and older who have been with the company for three months are eligible to participate in the ESOP and earn shares as they continue working for the company, he added.

Becoming an ESOP “allows us to keep the business moving without missing a beat,” he said.

In planning for succession, Ducharme “wanted to leave the company in the hands of an organization that is long-term focused,” rather than sell, for example, to a private equity investor who may retrade the company again in a few years, he said.

“If he sold to a PE, they may have a much shorter life cycle of buying and selling the business. He just wanted to avoid the churn that that could create to ensure that they maximize a return,” O’Brien said. “If he gives it to the employees, they know it’s going to be long-term based and we could manage the business accordingly and not sacrifice long-term growth for short-term benefit.”

Speedrack1Speedrack recently invested $65 million in a new 275,000-square-foot headquarters and production facility in Walker. (COURTESY PHOTO)

Speedrack Products Group employs about 260 people at facilities in Walker and Quincy, near Coldwater. O’Brien said the company expects to reach about 300 employees as it ramps up to two shifts at the new $65 million, 275,000-square-foot corporate headquarters and plant in Walker, which the company announced in July 2021.

E-commerce giant Amazon.com Inc. is “by far” the company’s largest client, Quist said. As Amazon has grown and developed new distribution centers in recent years, Speedrack has provided more than pallet racking and produced racking systems that include mezzanines and staircases “and the whole nine yards,” he said.

“With e-commerce over the last five years or so — especially with COVID — really coming to fruition, it’s been great for us because it fits right into our wheelhouse in what we do as an organization,” he said.

Speedrack Products Group also hopes that becoming an ESOP drives higher employee engagement and can help to attract and retain employees. The company already has several long-time employees and low turnover, O’Brien said.

“We have a great bunch of employees anyway to start with, and I think we will just see people who sometimes would leave would maybe rethink that now because of the reward the ESOP gives them for longevity,” he said.

Speedrack Products Group joins several other West Michigan-based companies that have transitioned to an ESOP. Most recently, digital consulting firm Twisthink LLC decided last fall to move to an ESOP structure.

As MiBiz reported in October, the Grand Rapids area ranks as one of the top markets nationally for ESOPs. Certified Employee-Owned LLC, a five-year-old San Francisco-based company that certifies businesses with employee stock ownership plans (ESOP), ranks Grand Rapids 12th in an inaugural list of the top 25 markets in the U.S. for ESOPs.

Speedrack was advised on the deal by Warner Norcross + Judd LLP. Local advisers to the ESOP included Wyoming-based Vision ESOP Valuation LLC.

Read 3367 times Last modified on Monday, 13 February 2023 16:55