After a 126-year history in the Quad Cities, The Schebler Company has new owners – its employees.
The Bettendorf manufacturer announced Tuesday, Jan. 25, that it now is an employee-owned business. Privately held since its founding in 1895, Schebler transferred 100% of the company to a new Employee Stock Ownership Plan (ESOP) as of Dec. 30, 2021.
Schebler’s employees could significantly benefit from their ownership via continued job security, the addition of a substantial retirement wealth benefit and a planned transition of the business’ investors and board of directors.
“This is so great for the employees, especially the younger people in the company – what a great retirement plan,” Schebler CEO Jim Anderson said in an interview Tuesday with the Quad Cities Regional Business Journal.
The company manufactures commercial chimney systems for customers throughout North America, provides custom and contract specialty fabrications as well as provides commercial and residential heating and air conditioning solutions. It employs 190 at its plant, which neighbors Arconic Davenport Works in Riverdale.
Mr. Anderson, who has led the company since November 2007, said the transition ensures Schebler will remain a prominent Quad Cities employer, which not only benefits customers and supplier partners but also the community.
He said Schebler pursued the ESOP model after the board of directors began discussions about a transition plan. According to Mr. Anderson, the company had been owned by eight investors, including himself, for nearly 22 years and serious talks about succession planning began in 2021.
“There were really three alternatives: a strategic buyer, a financial buyer and an ESOP, in no priority order,” Mr. Anderson said. “I think the investors could have made more money off of a strategic buyer or a financial buyer, but there was a high likelihood (Schebler) would be broken up and portions would leave the Quad Cities.”
Across the chimney industry, he said European companies have been acquiring and consolidating some of their U.S. competitors.
He credited the ESOP alternative to one of Schebler’s investors, who is one of the nation’s leading ESOP attorneys. “It was a win for everyone of our stakeholders,” Mr. Anderson said of the investors, employees, customers, suppliers and community. “The transition to employee ownership means we will remain an integral part of the community as our business continues to grow.”
While the investors were not ready yet to move on, he said they and the management team committed to the ESOP as part of a transition plan over the next five to eight years. He said the first step was to set up an ESOP trust on behalf of the employees that is led by an independent trustee. Governed by the same rules as a 401(k), it is funded entirely by the company.
Mr. Anderson said the trust borrowed money from a bank and the previous investors which it then used to buy all the company’s shares. The cash flow of the company will pay off the debt as well as begin allocating shares to the employees’ retirement plan, he said. The now employee-owned company will pay back the investors over the next five to eight years. There is no cash outlay by the employees.
“The investors will get their money over time but also get to stay involved,” Mr. Anderson said. “Employees have a win because obviously they get a nice retirement benefit but also get job security. They also have a stake in the game now. It’s been statistically proven that ESOP companies grow faster than traditional businesses because of the motivation of employees.”
While the board of directors will remain intact, he said as some of the investors are paid their seller notes some may choose to go off the board and others may continue serving.
Founded in 1895 by two German immigrant brothers, Schebler originally supported the metal fabrication needs of the Quad Cities from a storefront in Davenport. It has grown to become a leading specialty manufacturing and services business for a wide array of industries and global markets. Its divisions include: Schebler Chimney, which represents about 50% of its business; Schebler Specialty Fab, which represents about one-third of its business; and Schebler Heating and Air, its smallest business segment.
Mr. Anderson said Schebler’s new marketing materials promote the ownership change. A piece for the chimney industry uses the new tagline: “Made in America by a team of owners.”
