The private equity firm that owns a majority stake in Distribution Solutions Group on Friday proposed acquiring the remaining shares of the distributor and taking the business private.
LKCM Headwater Investments, which says it currently owns about 79% of issued and outstanding DSG stock, floated a purchase of the remaining shares for $29.50 per share in cash. That price would place the company’s total enterprise value at just over $2 billion, the firm said.
J. Bryan King, DSG’s chairman and chief executive officer, is also the president of LKCM Headwater. He wrote in a letter to DSG’s board that although the firm remains confident in the “potential value creation opportunities” within DSG, the parent of Lawson Products and Gexpro Services has been constrained by the “pressures, inflexibility and short-term focus and expectations” of operating as a public company.
A privately owned DSG, King suggested, would have greater flexibility to implement growth initiatives, harmonize multiple ERP systems and organize sales and market strategies without those concerns.
King wrote that the firm expects to be ready to sign a definitive agreement on a transaction by early May, and that the deal could be completed within the subsequent two to four months.
“We believe the proposed transaction represents a compelling and certain opportunity for the company’s stockholders to realize immediate and substantial value for their investment,” King wrote. “We look forward to engaging in constructive dialogue with the special committee and its advisors.”
DSG disclosed the proposal in a brief statement Monday evening.
“Consistent with its fiduciary duties and in consultation with its independent and legal advisors, the DSG board of directors will carefully review and evaluate the proposal made by LKCM to determine the course of action that it believes is in the best interest of the company and all DSG shareholders,” the company said.
DSG is the no. 16-ranked distributor on ID’s latest Big 50 list.
