According to a press release issued today, CORT has acquired the rental operations of Lounge22, including product and exclusive rights to market the rental brand on a global basis. CORT is a subsidiary of Wesco Financial Corporation which is an 80 percent owned subsidiary of Berkshire Hathaway. Last week, Berkshire Hathaway filed a disclosure with the SEC indicating that it will attempt to acquire the 20 percent of Wesco that it does not already own.
CORT’s business operations suffered during the recession and sales remain weak. However, as we discussed in our review of Wesco’s Q2 results, management has returned the business to profitability through cost cutting initiatives. The acquisition of Lounge22 may be intended to boost long term growth prospects by expanding the selection of high end furnishings that are available to CORT customers.
As the main player in the “rent to rent” market, CORT’s business operations have suffered due to slower business formation during the recession as well as decreased activity in trade shows and similar events. CORT reported net income of $6.7 million for the second quarter and $8.4 million for the first half of 2010 which was up sharply over prior year levels. However, revenues dropped 4.25 percent for the second quarter and 9 percent for the first half compared to the same periods in 2009.
Terms of the Lounge22 acquisition were not disclosed in the press release.
Disclosure: The author of this article owns shares of Berkshire Hathaway. No direct position in Wesco Financial.