Florida Man Amassing Container Store Stake Is No Buyout King

(Bloomberg) -- It had all the hallmarks of a corporate raider gearing up for a hostile takeover of The Container Store Group Inc., a home-goods retailer whose stock cratered after a fleeting surge during the pandemic daytrading frenzy.

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A Florida investor was quietly snapping up the company’s stock, buying so much that by Monday he disclosed owning a more than 18% stake — making him the second-biggest shareholder after Leonard Green & Partners, the Los Angeles private equity firm.

The move set off alarms at The Container Store’s headquarters: On Tuesday, the company announced that it enacted a so-called poison-pill provision, a method used to ward off unwanted takeovers by making them prohibitively expensive, after the “rapid and significant accumulation” of its shares by a single stockholder.

But it turns out Amit Agarwal is no would-be Carl Icahn. He’s a 41-year-old former patent litigator in St. Petersburg, Florida, who works out of the local Subway sandwich shop and likes placing big bets in the stock market and at the poker table. He’s put down $8 million wagering there’s solid potential in the financially struggling retailer — especially if a real buyout artist comes out of the woodwork.

“There’s a gem inside this pile of mess and it will shine brightly enough to capture a buyer’s attention,” he said.

But, he added: “I could be wrong.”

The Container Store, a nationwide chain known for its closet organizers, storage shelves and container bins, has stumbled so badly that even a hobbyist like Agarwal was able to buy a big piece of it. Its stock surged during the Covid lockdowns — when amateur investors were piling into companies that were expected to benefit — only to tumble some 96% since March 2021, cutting its market value to less than $40 million.

The company is now contending with a difficult combination: declining revenues, a run of losses and a pile of debt that’s maturing in 2025 and 2026. In May, the company said it hired Latham & Watkins and JPMorgan Chase & Co. to consider strategic alternatives, which typically involves soliciting takeover offers or mulling other steps to deal with financial distress.

On Wall Street, the few analysts who still track the company are skeptical of its prospects: One advises selling the shares; the other two deem it a hold. None are suggesting clients buy it. In July, S&P Global Ratings downgraded The Container Store to CCC+, deep into junk grade, seeing mounting risks it will be pushed to default on its debts.