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M&A activity up in electrical sector

Staff -- Industrial Distribution, 11/1/2006

Electrical products distributors ranging in size from giants Rexel and Graybar to smaller regional operations have engaged in a frenzy of recent mergers, acquisitions and expansions.

The activity came despite indications that confidence in the electric sector continues to fall. The National Electrical Manufacturer’s Assn.’s Electroindustry Business Confidence Index for North America declined for the fifth consecutive month in September, falling 10.2 points to 36.

A reading below 50 indicates the sector is contracting, according to NEMA. The EBCI’s current conditions index had previously topped 50 points for 39 consecutive months.

That didn’t stop Graybar Electric from posting double-digit growth for the first half of 2006, and an operating income increase of 68 percent over the first half of 2005.

The St. Louis-based distributor reported 19.7 percent growth in the first half of 2006, to $2.45 billion, compared to the same period last year. The company also landed a $17.5 million contract to provide MRO supplies to military and federal civilian agencies.

On the mergers and acquisitions front, international juggernauts Rexel and Wolseley continued to purchase electrical distributors around the globe, while smaller, regional distributors expanded their reach into other markets:

• Amid news of a possible IPO for the privately held Rexel Group of France— which could be the largest IPO ever at $5.1 billion—Rexel bought Doraville, Ga.-based DH Supply , doubling its locations and sales in the greater Atlanta area. The company also purchased Kesco Electric Supply Ltd., an electrical distributor based in Peterborough, Ontario.

• Wolseley, the British supplier of plumbing and heating products and building materials in North America and Europe, bought Sigmatec SAS, an electrical distributor based in Northern France that earned $7.14 million last year. The deal was one of more than 50 acquisitions Wolseley made this year.

• Birmingham, Ala.-based Mayer Electric Supply followed its August purchase of Jones & Lee Supply Co. of Knoxville, Tenn., with the acquisition of the distribution arm of Higgins Electric of Dothan, Ala. Earlier this year, Mayer bought Biloxi Electric Supply.

Facility Solutions Group, a national energy-service company, increased its reach into the East Coast market with the purchase of O.K. Electric Supply Co. of Perth Amboy, N.J.

U.S. Electrical Services LLC of Chester Springs, Pa., bought Duplex Electrical Supply Corp. , a distributor of electrical components for electrical contractors.

Summit Electric Supply expanded from its New Mexico base into Texas, Arizona, Louisiana and Florida, with new locations in 20 cities including Jacksonville and Orlando.

WESCO International agreed to purchase Communications Supply Holdings , a distributor of low voltage network infrastructure and industrial wire and cable products. Pittsburgh-based WESCO, which ranked 4th on Industrial Distribution’s Top 10 list of electrical distributors, said it expects the acquisition to immediately boost earnings. Terms of the deal, expected to close early this month, were not disclosed.

Monarch Electric Co. opened two new branches, in Ronkonkoma, N.Y., and Belford, N.J., to serve the Long Island market and expand the U.S. Electrical Services Inc.-owned business’s presence in the hardware market.

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