John Rydman, Spec’s president and one of the owners of the Houston-based chain, said it obtained the exemption through its Jan. 1 purchase by Gabriel Investment Group.

The purchase gives Specs the option to sell the exemption to a public company in the future, Rydman said. But it also prevented a public company from acquiring the exemption and invading Spec’s turf in Texas, where it is the largest retailer of distilled spirits with more than 200 stores.

“Of course,” Rydman said when asked if keeping potential competitors out was part of the acquisition. – It had to.

He said he did not know if there were other bidders. But it is well documented that Walmart has wanted to break into the liquor store in Texas.

“I’ve never been familiar with it,” Rydman said. “I didn’t know who I was up against, other than we were negotiating a purchase.”

A Walmart spokesman said the company would not comment. A representative for Blake-Wilder Companies, a St. Petersburg, Fla., company that had owned a stake in Gabriel Investment Group, did not respond to a request for comment.

Rydman would not say how much it cost to buy Gabriel, but he confirmed it was more than $10 million.

Since the deal closed, Rydman said he’s been peppered with the same question from industry players: Which state is Spec expanding to next?

“My statement is we’re still a Texas company,” he said. “There is so much good here in Texas and so much growth here in Texas that Texas can keep me very busy.”

Specs tried unsuccessfully to buy Gabriel more than 15 years ago, with negotiations spanning four years before ending around 2010, Rydman recalled.

But Gabriel did not give up trying to find a buyer. For nearly a quarter of a century, it said in court papers in 2020, it marketed its business to other companies. In recent years, it added, those efforts focused on Walmart.

“Johnny had always dreamed that he would be able to sell to Walmart,” Rydman said. “That was his dream. He was going to cash out.”

However, Walmart was concerned that it wouldn’t get the exemption in a sale, Gabriel said in a 2020 lawsuit.

Around the time Walmart split its reservations in 2019, Gabriel and four related entities filed for bankruptcy.

The Gabriel family had been in the liquor business for more than seven decades before the bankruptcy filings, building a significant local market share with dozens of stores. Annual revenues topped $100 million in 2012, a court filing showed.

Public ban challenge

Gabriel’s rare situation as a public company operating under a state “package store permit” traces its roots back to 1995.

That year, state lawmakers prohibited public corporations from owning or having an interest in a package store permit as a way to keep liquor stores under family ownership. However, the legislature exempted any public company that already had permits or had permit applications pending as of April.

A public company is defined as a legal entity that trades on a public stock exchange or that has more than 35 people with an ownership stake in the entity. Gabriel Investment Group met the definition of a public company because, although it was privately held, it had more than 35 owners, so it received an exemption. The only other entity with such an exemption is Solley’s Liquor, which operates seven stores in Beaumont and the surrounding area, a spokesman for the Texas Alcoholic Beverage Commission said.

Walmart has long sought to change the law, and it has unsuccessfully challenged the ban on public companies on at least a couple of occasions. In 2015, it sued TABC in federal court in Austin, describing itself in the suit as the largest retailer of wine and beer in Texas.

“Walmart also wishes to sell distilled spirits at its Walmart and Sam’s Club locations in Texas for off-premise consumption,” the lawsuit states. “However, it is prohibited from doing so because Texas law irrationally prohibits any publicly traded company from owning or holding the permit needed to do so, i.e., a ‘package store permit.’