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Companies expand their footprints with foreign acquisitions

Distributors and manufacturers are investing in foreign acquisitions at a rapid clip; also, an update on the hunt for Hagemeyer

By Brad Perriello, Associate Editor -- Industrial Distribution, 12/1/2007

Distributors and manufacturers alike are increasingly looking to expand their footprints overseas, as demonstrated by a rash of recent foreign acquisitions.

As usual, Wolseley leads the charge. The British building materials distribution giant made 10 acquisitions for $353.6 million so far this fiscal year.

Of the company's five most recent buyouts, on which it spent $174.7 million, four were in the United States: Wolseley's Stock Building Supply subsidiary bought commercial door manufacturer/distributor Architectural Building Supply Co. of Salt Lake City and Jacobi Hardware Co. of Wilmington, N.C., and KBC Construction, a turn-key framer and wall panel manufacturer based in Albuquerque; its Ferguson Enterprises plumbing supplies subsidiary snapped up the inventory of J.D.'s Wholesale Plumbing & Supply, a Pagosa Springs, Colo.-based plumbing distributor.

Just across the English Channel from its home base, Wolseley France acquired roof truss manufacturer Sofiparts SAS.

Another European leviathan, Dutch electrical distributor Hagemeyer, expanded in Latvia with a pair of purchases: SIA Energo and SIA Kolorits, both acquired through its Finnish subsidiary, Elektroskandia Oy.

Not to be outdone, French competitor Rexel (which made headlines with its bid for Hagemeyer—see p. 14) looked even further afield, acquiring Australian electrical distributor EIW Holdings in its seventh bolt-on buy this year.

American distributors also got in on the act, led by West Chester, Pa.-based lab supplies distributor VWR International, which acquired Dutch competitor Omnilabo International.

Detroit-based electrical controls distributor McNaughton-McKay Electric Co. entered the German market with its pickup of S+S GmbH and S&D GmbH, Rockwell Automation's distributor in that country.

And Avnet Inc., the Phoenix-based electronic components distributor, acquired ChannelWorx Pty. Ltd., an Australian network and security products distributor.

American manufacturers also increased their overseas footprints, with 3M Corp. agreeing to acquire Unifam, a Polish abrasives manufacturer.

Paoli, Pa.-based electric motors and instruments manufacturer Ametek Inc. got into the British distribution market with a $74 million buyout of Umeco R&O, the MRO division of British distributor Umeco plc. That helped Ametek enter the French market as well—Umeco R&O has a location in Toulouse.

Regal Beloit Corp. paid cash—though the Beloit, Wis.-based power transmission products manufacturer was coy about how much—for an Alstrom Corp. business that makes industrial motors and fans in India.

Glenview, Ill.-based Illinois Tool Works looked to Denmark for its latest foreign adventure, acquiring Densit, a manufacturer of cement-based special-purpose materials.

And Emerson Electric's climate technologies division spent $35.5 million building a 410,000-square-foot compressor plant in the Czech Republic, part of the St. Louis-based manufacturer's plan to expand its reach into the European semi-hermetic products market.

Cleveland-based Eaton Corp. stayed closer to home with its acquisitions of Babco Electric Group, a Canadian switchgear manufacturer, and Arrow Hose & Tubing Inc., an Ontario-based hose and tubing maker.

China was the name of the game for Cooper Industries. The Houston-based electrical manufacturer began a joint venture with China's Nature Science and Technology Co., a switchgear maker.

And finally, Swedish compressor manufacturer Atlas Copco also saw opportunity in the Far East, acquiring the remaining 75 percent stake in one of its joint venture partners, Shenyang Ruifeng Machinery.

 

The hunt for Hagemeyer

Three European distribution giants are hashing out a deal that would see one split between the other two, drastically altering the industry's landscape on both sides of the Atlantic.

French distributor Rexel agreed to spend $4.69 billion to buy Dutch rival Hagemeyer, which it will then split with French competitor Sonepar if the deal goes through.

The agreement followed weeks of speculation that Rexel would make a takeover bid for the electrical distributor, whose North American division ranked 10th on INDUSTRIAL DISTRIBUTION's 2007 Big 50 list of distributors, with 2006 sales of $1.88 billion.

The rumors sent Hagemeyer's stock price up by as much as 40 percent, until Sonepar surprised the field with a roughly $3.5 billion bid.

Hagemeyer promptly rejected the offer as too low, even though it was 48 percent higher than the Dutch company's Sept. 27 closing price.

But Rexel, ranked second on ID's 2007 Top 10 Electrical Distributors list with 2006 sales of $12.3 billion, soon trumped Sonepar (ranked first on the Top 10 with '06 sales of $12.4 billion) with a $4.3 billion cash bid.

That offer had a twist—if Hagemeyer took the deal, a 60 percent premium over the Sept. 27 closing price, Rexel would sell some of Hagemeyer's assets to Sonepar, which withdrew its bid after Rexel upped the ante.

Hagemeyer again rejected the offer as too low, saying it expects much improvement in its business, including greater return on invested capital and operating margins for its core Professional Products and Services division, higher profits from its British operations, improved operating margins and working capital productivity in its American business and the potential for more than $286.5 million in reduced tax payments.

Rexel then increased its offer by 5 percent, offering $4.69 billion (a 68 percent premium over the Sept. 27 stock price), and Hagemeyer agreed to the deal, which is predicated on Sonepar tendering its existing 10.49 percent stake in Hagemeyer to Rexel. A due-diligence phase began Nov. 14., but the companies did not indicate when the transaction might close.

If the deal is consummated, Rexel would wind up with roughly 60 percent of Hagemeyer's assets, mostly in Europe: the Baltic nations of Estonia, Lithuania and Latvia (where Hagemeyer recently bought two electrical distributors —see p. 13), Belgium, the Czech Republic, Finland, Germany, Ireland, the Netherlands, Norway, Poland, Russia, Slovakia, Spain and the United Kingdom.

The remaining 40 percent, including Hagemeyer's businesses in America, Asia-Pacific, and Austria, Sweden and Switzerland, would go to Sonepar in return for approximately $1.84 billion.

That would mean more than 50 percent of Rexel's global sales would come from Europe, rather than North America.

Sonepar's annual sales in North America would jump nearly 57 percent to almost $5.8 billion and global sales would increase by roughly 28 percent.

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