New lighting technology, investment in Asia and more mergers and acquisitions were front-page news in 1997.
Anyone who considers the electrical wholesaling business to be a staid, smokestack-oriented industry must be surprised at some of the changes and new technologies that took hold in the market in 1997. Increasing interest in fiber-optic lighting and other alternative light sources, new marketing strategies aimed at locking up the energy-retrofit business of national accounts, advances in online ordering and millions of dollars invested in the Asian market were the biggest trends that took root in 1997. This article chronicles these changes, and offers some insight into how they may reshape the electrical industry for years to come.
The spotlight shone on new products and new marketing strategies in the lighting market. For the past 20 years, the lighting market has focused much of its energies on developing solutions to replace electricity-guzzling, inefficient lighting systems. While this movement is still sweeping through the industry with a full head of steam, there are some new trends to watch.
For one, there's a ton of action and investment in the fast-growing fiber-optic lighting market and in alternate lighting technologies such as light pipes and remote-source lighting. These technologies have attracted interest in recent years because of the crisp, white light they produce and the design options they offer. One very active new player in this market is Advanced Lighting Technologies, Inc. (ADLT), Cleveland, Ohio. ADLT, with $86.5 million in sales last year, built on its base in the metal-halide market and expanded into the fiber-optic market with acquisitions of and joint ventures with several fiber-optic lighting equipment manufacturers. The company plans to use these deals to offer a package of fiber-optic lighting systems using metal-halide lamps. ADLT has a 30% market share in metal-halide sales worldwide and a 10% share of these products in the U.S.
The company bought Cable Lite Corp., Dallas, Texas; took an 18% stake in Fiberstars, Inc., Fremont, Calif.; formed a joint venture with Japanese metal-halide products manufacturer Koto Luminous, Inc; bought British metal-halide systems manufacturer W.J. Parry Electrical; and formed a joint venture with fiber-optic cable manufacturer Rohm and Haas Co., Philadelphia, Pa. The company also purchased Ruud Lighting, Inc., Racine, Wis., a well-known manufacturer of outdoor lighting fixtures that markets its products by catalog. ADLT will eventually sell its new lighting systems in this catalog.
Another fiber-optic lighting manufacturer attracting attention from investors is Remote Source Lighting International, Inc., Morrisville, N.C. Among the 42 strategic relationships it developed over the past two years were a $10 million equity investment from Strategic Resource Solutions Corp., a subsidiary of Carolina Power and Light Co., and a $6 million cash infusion from Quantum Industrial Partners LDC, New York, N.Y.
A new player with a long track record of innovative product development has also joined the ranks of companies now interested in alternative light sources. 3M Co., Minneapolis, Minn., is producing light pipes that blend some radical reflector technology first developed in the R&D department of 3M's abrasives business unit with a sulfur lamp manufactured by Fusion Lighting, Inc., Rockville, Md. A 20-meter long light pipe can replace four to five lighting fixtures and significantly cut energy costs.
These are not the only companies getting interested in alternative lighting technology. Among the acquisitions and joint ventures engineered this year by Chicago Miniature Lamp, Inc. (CML), Canton, Mass., was a joint venture with Germany's Schott Corp., a billion-dollar manufacturer of optical and technical glass products.
CML has been an acquirer of lighting companies on the global scene and made over a dozen acquisitions in the past five years. During 1997, CML purchased Valmont Electric's ballast division based in El Paso, Texas, and renamed it Power Lighting Products. Then in August, it bought lamp manufacturer Sylvania Lighting International, Geneva, Switzerland, for $165 million, and its Power Lighting unit became the lamp company's key ballast supplier. Sylvania Lighting International was a privately held company, distinct from the U.S.-based Sylvania lamp business that GTE sold to Osram in 1993.
National accounts such as Fortune 500 companies with millions of square feet of offices, factories, government and military buildings, hospitals and schools have always been the largest potential customers for lighting retrofits. No news there. But this year two groups of energy-service companies (ESCOs) and electrical distributors formed partnerships that stretch past regional boundaries to serve national accounts and other large customers.
The Preferred Products Group (PPG), Trenton, N.J., is a group of ESCOs now selecting preferred vendors to supply all of their retrofit work. On the distributor side, Bernie Erickson, executive vice president, O.K. Electric Supply Co., Perth Amboy, N.J., formed Upgrade Solutions, Inc., Colts Neck, N.J., a nationwide alliance of electrical distributors created to sell energy-efficient electrical products to national accounts.
Other big lighting news included the marketing agreement between GE Lighting, Cleveland, Ohio, and MagneTek, Inc., Nashville, Tenn., to jointly market MagneTek's electronic ballast line. AFC Cable Systems, New Bedford, Mass., purchased Area Lighting Research, Inc., Hackettstown, N.J. Hubbell, Inc., Orange, Conn., purchased, through its Bryant subsidiary, Unenco Services, Inc., Alameda, Calif., a manufacturer of occupancy sensors. Little Neck, N.Y.-based Leviton Manufacturing Co. purchased Macro Electronics Corp., Austin, Texas, a lighting controls manufacturer.
Companies continued to lay the foundation for the future of electronic commerce in the electrical industry. The slow acceptance of the tools of electronic commerce such as CD-ROMs, the Internet, vendor-managed inventory (VMI), electronic data interchange (EDI) and bar coding frustrate proponents. But during the past year, some of the industry's technological leaders have made progress in the application of what probably will be the form of electronic commerce that will revolutionize the distribution channel-online ordering. Several manufacturers and distributors launched systems in 1997 that offer some form of online ordering or online order-status checks:
* The Smart.net online ordering system introduced by Hubbell is promoted as the electrical industry's first online ordering system that doesn't require proprietary software; * The password-protected EasyNet Access system of Thomas & Betts Corp., Memphis, Tenn., offers users online access to ordering; * GE Supply, Inc., Shelton, Conn., launched its QuickLink program for online quotes and pricing, and GE SupplyNet for online ordering; and * W.W. Grainger, Inc., Lincolnshire, Ill., a leader in electronic commerce for years, began offering online ordering linked to what's generally regarded as the distribution industry's most innovative online catalog.
Along with a few pioneers staking out early claims to online ordering, there was plenty of action on a variety of other fronts in electronic commerce. At press time, the National Association of Electrical Distributors (NAED), St. Louis, Mo., was still considering proposals by vendors for the data warehouse concept it's developing with the National Electrical Manufacturers Association (NEMA), Rosslyn, Va. The data warehouse will give electrical distributors and other users online, instant access to standardized product and ordering information they need to do business electronically.
Another organization harnessing the Web is Affiliated Distributors, Inc., Wayne, Pa., which developed its A-D Net intranet to give members access to marketing programs and other A-D information. In what's probably the electrical industry's strongest ultimatumso far demanding the use of electronic commerce, A-D announced that members must help the organization cut down on paperwork by establishing e-mail accounts and Internet access, and submitting marketing plans online by mid-December this year-or risk losing eligibility for the group's Sales Stimulator Plans (SSP) and the funds associated with that program.
The hard times that Industry.net, Pittsburgh, Pa., fell on illustrate the volatility of the electronic commerce world. Industry.net provided many electrical distributors with their first exposure on the Web-and promises of orders from industrial companies shopping the online service. But the company could never sign up enough users; it filed Chapter 11 in May and was purchased by Perot Systems Corp., Dallas, in July.
In other electronic commerce news, Sterling Commerce, Inc., Dallas, purchased Automated Catalogue Services, Wayne, Pa. Automated Catalogue developed the AnswerPro CD-ROM for NAED and the KRIS electronic catalog for the Association for High Technology Distribution (AHTD), Philadelphia, as well as several other trade association electronic catalogs.
Manufacturers looked to Asia for future expansion. Despite the tsunami that recently swamped Asian financial markets, U.S. electrical manufacturers are opting for a long-term play and are investing millions in a region they see as offering tremendous growth opportunities. Countries like China, Singapore and Vietnam are starting to construct enormous power grids and are building or modernizing manufacturing plants to feed the Asian economy. This will create demand for all types of electrical products and explains why most of the expansion in international markets for electrical manufacturers over the past two years has been in Pacific Rim countries. Over the past two years, Electrical Marketing newsletter ran over 20 articles on electrical manufacturers opening up or expanding offices in the Far East, or forming joint ventures with or acquiring companies from the region.
In 1997, Essex International, Inc., Fort Wayne, Ind., opened in Singapore; GE expanded its Singapore-based operations to include its lighting and electrical distribution and control business units; General Signal Corp., Stamford, Conn., announced it will invest $10 million over the next five years in Asia; and Littelfuse, Inc., Des Plaines, Ill., opened an office in Yokohoma, Japan, and bought a South Korean fuse manufacturer.
GE Lighting and Japan's Hitachi consolidated their four-year old joint venture and decided to market all lighting products in that country through the joint venture, Hitachi GE Lighting, Ltd.; Hubbell Premise Wiring, Stoningham, Conn., formed a joint venture with a Korean firm to market datacom systems in Korea; Siemens formed a joint venture with a Tokyo relay manufacturer; Underwriters Laboratories, Inc., Northbrook, Ill., began offering Chinese certification for exporters of products to that country.
Other electrical manufacturers that have invested heavily in Asia in recent years include Eaton Corp., Cleveland, Ohio; Emerson Electric Co., St. Louis; Panduit Corp., Tinley Park, Ill.; and Siemens Energy & Automation, Inc., Alpharetta, Ga.
Big regional distributors lead 1997's list of distributor acquisitions and mergers. The distributors acquired in 1997 read like a Who's Who of the electrical wholesaling industry. Two of the largest deals involved Allen-Bradley distributors. Warren Electric Group, Houston, Texas, purchased Watson Electric Supply Co., Dallas, and Rumsey Electric Co., Philadelphia, Pa., bought Tecot Electric Supply Co., Inc., New Castle, Del. The acquisitions gave Warren Electric and Rumsey Electric the keys to further their expansion into the automation and industrial markets in the Texas and Philadelphia/Delaware metropolitan markets, respectively.
With the possible exception of WESCO Distribution, Inc., Pittsburgh, Pa., Rexel, Inc., Coral Gables, Fla., has made more big acquisitions than any other electrical distributor over the past few years. The company, owned by Paris-based Rexel SA, continued acquiring strong independent distributors, and in 1997 plucked four companies off EW's 250 Biggest listing. Rexel bought Chemco Electric Supply Co., Tampa, Fla., Pacific Electrical Supply, Inc., San Leandro, Calif.; Southland Electrical Supply, Lexington, Ky.; and Taylor Electric Supply, Inc., Portland, Ore. Rexel also sold off its utility division to a group of managers led by Rexel's former chief financial officer.
Westburne Supply, Inc., Montreal, Quebec, continued its expansion into upstate New York with three acquisitions. Through its Buffalo, N.Y.-based U.S. electrical division, Wehle Electric Co., Inc., Westburne acquired Fluorescent Light & Fixture Co., Syracuse; Loyal Electric Supply Corp., Albany; and M&L Electric Co., Utica. The company also purchased Richard and Cie Ltee, Ste-Foy, Quebec, and Heles Supply Co., Inc., now based in Plymouth, Minn.
Anicom, Inc., Rosemont, Ill., also was on the acquisition trail and added to its reputation as one of the wire and cable industry's fastest-growing players with three acquisitions. The company, with $116 million in 1996 sales, bought Carolina Cable and Connector, Inc., Raleigh, N.C.; Energy Electric Cable, Inc., Auburn Hills, Mich.; and Security Supply, Inc., New Orleans, La.
Continuing on an acquisition binge that started several years ago, WESCO solidified its position in the utility market with the purchase of two utility specialists- Diversified Electric Supply Co., North Little Rock, Ark., and Maydwell & Hartzell, Brisbane, Calif., one of the largest utility distributors in the western U.S. In 1996, WESCO bought utility specialist Hamby Young Power Supply Products, Inc., Aurora, Ohio.
In other distributor acquisitions, Billows Electric Supply Co., Philadelphia, bought Schneck Electric Supply, Reading, Pa.; Consolidated Electrical Distributors, Inc., Westlake Village, Calif., bought Capital Electric Group, Inc., Phoenix, Ariz., and Lappin Electric Co., Milwaukee, Wis.; The Hite Co., Altoona, Pa., acquired Desco Supply Co., New Castle, Pa.; Springfield Electric acquired Boland Electric Supply Co., Decatur, Ill., and Moline Electric Supply Co., Springfield, Ill.; and Tristate Electrical Supply Co., Inc., Hagerstown, Md., acquired West Chester Electric and Electronics, Inc., West Chester, Pa., and Harco Electronics, Aberdeen, Md.
At press time, Border States Industries, Fargo, N.D., had signed a letter of intent to purchase Gorman-Bruce Electric Supply Co., Inc., El Paso, Texas.
Merger and acquisition mania continues for electrical manufacturers. Along with a full slate of merger and acquisition activity and the lighting deals mentioned earlier, 1997 saw a unique marketing arrangement. General Signal's Electrical Products Group, based in Farmington, Conn., and Emerson Electric Co. of St. Louis, have formed a joint venture to market a package of fittings, enclosures, connectors and other commercial/industrial products. The new venture is called EGS Electrical Group.
Most active in the acquisition hunt this year was Cooper Industries, Inc., Houston, parent company of well-known electrical names like Bussmann, Cooper Lighting and Crouse-Hinds. Cooper added product lines to these subsidiaries with seven acquisitions. The company acquired Coiltronics, Inc., Boca Raton, Fla., a power-quality products manufacturer; Electromec, a Brazilian fuse manufacturer; the Mexican fuse manufacturer Karp Electric; Kearney Co., Tucker, Ga., a utility products manufacturer; Thepitt Manufacturing and Major Liting, both of The Meadow Lands, Pa.; Myers Electrical Products, Inc., Montebello, Calif.; and Menvier-Swain, Group plc, Banbury, England, a manufacturer of emergency lighting, and security systems alarms and sensors for commercial and industrial applications.
Thomas & Betts is always building its product package through acquisitions, and this year was no different. The company acquired the following companies: Diamond Communications Products, Inc., Garwood, N.J., a grounding products manufacturer; Electroline Manufacturing Co., Inc., Cleveland, Ohio; the Marr Group Ltd., Mississauga, Ontario; Patriot Products, Inc., a manufacturer of wire management products; the Tanco line of enclosures from Electro-Resources Corp., Houston; and Taylor Wiring Duct (from Gould Shawmut) Newburyport, Mass.
Other manufacturer acquisitions included the purchase by AFC Cable Systems of Madison Electric Co., Cleveland, Ohio; the acquisitions by Belden, Inc., St. Louis, of Alpha Wire Corp., Elizabeth, N.J., and Intech Cable, Inc., Hudson, Mass.; the purchase by Intermatic, Inc., Spring Grove, Ill., of M. Stephens Manufacturing, Cudahy, Calif.; and West Hartford, Conn.-based The Wiremold Co.'s acquisition of the wiring products business of Dual-Lite, based in Coeur d'Alene, Idaho.
Several other lighting acquisitions were mentioned earlier in this article. For a more comprehensive list of electrical distributor and manufacturer acquisitions in 1997, check out EW's Web site at www.ewweb.com.