Ron Simon’s recent buyout of the private equity firm that owned half of his RSI Home Products Inc. did more than double his holdings in the Anaheim-based cabinet maker.
The deal also cleared the way for Simon to take full advantage of the operations of Professional Cabinet Solutions, a second manufacturer he owns under his RSI Holding LLC in Newport Beach.
PCS specializes in made-to-order, semi-custom frameless cabinets produced at a manufacturing plant in Mira Loma. It’s a higher-end brand whose potential had been tempered by a need to avoid any conflicts of interests with RSI Home Products, which aims squarely at the value segment of the cabinet market.
RSI Holding doesn’t break out revenue from its various operations, which include homebuilder RSI Development. It is estimated to be among the largest private companies based in Orange County, with about $500 million in annual revenue. It employs about 600 workers here out of a companywide total of 4,000.
The PCS cabinet brand currently is believed to bring in less than 10% of overall revenue.
That number is expected to rise now that RSI Holding has full ownership of both its cabinet lines. RSI Home Products competes with various other brands chasing about $1.5 billion in annual sales that come mostly from home-improvement retailers, such as Home Depot and Lowe’s.
PCS will look to expand further within the made-to-order segment of the market, which accounts for an estimated $5 billion in annual sales through builders, retail home centers, and kitchen and bath dealers. Plans call for PCS to offer both of its own upscale brand and RSI Home Products merchandise as part of its expansion.
Simon said he expects PCS to grow into the bigger of the two cabinet brands in coming years.
RSI Holding raised $525 million in a bond offering in February and used $323 million to buy back the 50% share of RSI Home Products from Onex Corp. in Toronto. The rest of the bond money went to repay the company’s existing bank debt.
Full ownership of RSI Home Products allows Simon to market his made-to-order line of cabinetry more aggressively, using personnel and manufacturing capacity for both brands as needed.
“This will bring a value proposition to this market segment not seen before,” said Simon, who couldn’t have made those sorts of moves while Onex owned part of RSI Home Products. The private equity firm had no stake in the PCS brand, and both parties had agreed to steer clear of any conflicts of interests between the two cabinetmaking operations under the RSI umbrella.
“We couldn’t get RSI Home Products involved in PCS because of conflicts with Onex, but that doesn’t exist now,” Simon said during a recent visit to the Newport Beach headquarters of RSI Holding, where he is chairman.
RSI Home Products has factories in Anaheim; Dallas; Lincolnton, N. C.; and Tijuana, MX. PCS has one in Mira Loma and is planning to expand its operations into Texas and North Carolina.
The two brands will maintain separate operations and leadership: Jeff Hoeft, a 17-year RSI veteran, will continue as president and chief operating officer of RSI Home Products, positions he’s had since 2010; Eric VanDerHeyden, who also has been with RSI for 17 years, will remain president and general manager of PCS.
Both Hoeft and VanDerHeyden report to Alex Calabrese, president and chief executive of RSI Holding and a 22-year veteran of the company.
“We’re now investing in a human-resources bench for PCS … to strengthen the management side,” Calabrese said.
RSI did give some thought to keeping Onex in the picture, according to Simon.
“We had talked about bringing the companies together while Onex had an investment in RSI, but there was no way the firm could’ve come up with a valuation for PCS that we could’ve been pleased with,” Simon said.
Not to mention it also was a good time to go to the bond market.
“It was a perfect time,” Simon said. “It’s comfortable debt for us. The low interest rate will help us, too.”
Having the world’s biggest bond fund investor as a neighbor in Newport Beach appears to have helped.
Pacific Investment Management Co., which has about $2 trillion in assets under management, played a part in the bond offering.
“[Pimco]… is one of our many investors—one of many prestigious names holding our bonds now,” Simon said.
RSI’s plans for brand integration also parallel a general recovery in the homebuilding industry, which is expected to be a boon to U.S. businesses that count ties to real estate.
