Hughes Supply buys remaining shares of bestroute.com

By Staff -- Industrial Distribution, 11/1/2000

Orlando, fla.-Hughes Supply, Inc. acquired the remaining 51 percent interest of online distributor bestroute.com LLC in late September.

Previously, Hughes Supply owned 49 percent of bestroute.com. The acquisition brings Hughes' total investment in bestroute.com to approximately $23 million. Bestroute.com will operate as a subsidiary of Hughes Supply.

"Just as when we made our initial investment in this company nine months ago, bestroute.com continues to be a very attractive e-commerce opportunity in its own right,'' said Hughes Supply chairman and chief executive officer David H. Hughes. "Since our initial investment, bestroute.com has developed its business ahead of schedule and on budget, and is now demonstrating through real transactions that their technology solution and value proposition of focusing on hard-to-find trade products is sound.

"As a result, we're confident that a closer tie to bestroute.com's experienced management team and technology resources will help fuel innovation at Hughes, and accelerate our own technology deployment, e-commerce plans, and business development program."

Hughes added that the current bestroute.com management team will continue to head up the new subsidiary, and bestroute.com's president, Mike Gambino, will join the Hughes executive leadership team.

Hughes Supply has issued approximately 723,000 new shares to fund the acquisition, its initial investment having been paid in cash. The company plans to repurchase an equivalent number of its own common shares in open market transactions, under a share buyback program previously authorized by the board of directors.

Hughes said that bestroute.com is focused on ramping up to profitability levels that he expects will exceed traditional distribution businesses.

"Given bestroute.com's relatively low overhead and operating costs," he said, "we believe that they can achieve break-even and move into attractive levels of profitability at very low market penetration rates. During 2001 and 2002, bestroute.com will be investing heavily in moving into its next vertical markets, sales generation, and brand recognition."

Bestroute.com is a niche distributor that specializes in stocking hard-to-find products. The company serves the electrical market and plans to move into the HVAC/R, plumbing, and PVF industries, aligning itself with Hughes Supply's markets.

"Traditional distributors use us to augment their inventories-and help them serve their customers on non-stocked item requests," said Gambino. "And contractors and plant professionals use us to compress delivery schedules, speed-up construction jobs, and reduce downtime.''

Gambino said bestroute.com was designed from the start to support both traditional phone/fax and new e-commerce-based purchasing routines.

Hughes said the acquisition is one of several new strategic initiatives the company is taking to increase its operational strength, competitive position, and shareholder value.

"We'll be aggressively using technology to communicate, drive down costs, reach new customers, and strike new alliances. We'll be leveraging the economies of scale achieved in the '90s in new and innovative ways,'' he said.