The economy is a downer once again
It's hardly news that business has been a bit of a disappointment for most electrical companies this year. But it was sobering how quickly the sense of optimism that many electrical execs had early in the year evaporated. When Electrical Wholesaling's editors surveyed distributors for our annual Top 200 listing in April, we were surprised at how many executives were expecting double-digit growth for 2012, but when we surveyed many of them again in August for the EW Market Planning Guide, few CEOs were expecting growth of 10% or better for the year.
The stagnant pricing environment for copper and steel reflects a lack of demand
There are no surer signs of a sluggish market than when prices for copper and steel move sideways and in some cases drop over the course of a year, but that's the situation the electrical market was in at press time. Copper spent much of 2012 in a 40-cent range from $3.30- to $3.70-per pound, and prices for most types of steel (with rebar being a notable exception) look like they might end the year at or below where they started 2012.
The giant distributors acquire an estimated $1 billion-plus in sales through acquisitions this year
Distributor acquisitions have been on a tear over the past 18 months, and from what EW's editors hear, more deals are cooking at year-end. In 2012, we covered the acquisitions of more than 30 distributors around the world (see chart on page 23), and each was interesting in its own way. But there's no doubt that Rexel SA's purchases of Platt Electric Supply, Beaverton, Ore., and Munro Distributing Co. Inc., Fall River, Mass.; Sonepar's acquisition of Codale Electric Supply, Salt Lake City, Utah; Crescent Electric Supply's acquisition of Stoneway Electric Supply, Spokane, Wash.; and the purchase of Walters Wholesale Electric, Signal Hill, Calif., by Consolidated Electrical Distributors Inc., Irving, Texas, got people gabbing the most.
The acquisitions of these five Top 200 distributors alone accounted for more than $1 billion in sales. Add in Sonepar's 2011 acquisitions of Independent Electric Supply, San Carlos, Calif., and OneSource Distributors, Oceanside, Calif., and you have nearly $2 billion in distribution sales that changed hands in less than two years. That's a big chunk of the $90 billion electrical wholesaling industry.
The prices Rexel paid for Platt Electric Supply and Munro Distributing Inc. spark lots of industry chatter
You don't always learn about the purchase price of distributor acquisitions, but when Rexel published what it paid for two blue-chip independent distributors, it attracted lots of attention. According to its press releases, the company paid roughly $377 million for Platt Electric Supply, which had $394 million in 2011 sales, and paid $150 million for Munro Distributing, which reported 2011 sales of $114.8 million for EW's 2012 Top 200 listing.
Several acquisitions and partnerships show how some distributors are thinking past the traditional boundaries of the electrical market
WESCO Distribution Inc., Pittsburgh, Pa., is well-known for its purchases of distributors in tightly focused niches adjacent to the mainstream electrical channel. Its 2012 purchases of Conney Safety Products, Madison Wis.; Trydor Industries, a utility specialist in Surrey, British Columbia; and EECOL Electric Corp., Calgary, Alberta, a commercial/industrial distributor with a focus on western Canada's energy markets; all follow this trend.
Dakota Electric Supply, Fargo, N.D., which has for some time run businesses outside the mainstream market, also ventured into adjacent niches with its purchases of Fargo Water Equipment, Fargo, N.D., and W.A. Roosevelt, a plumbing, HVAC and electrical distributor based in Madison, Wis. In related deals, Turtle & Hughes, Linden, N.J., bought Mag-Trol Inc., Long Beach, Calif., a specialist in industrial controls and related equipment for maritime applications in harbors, and Schaedler Yesco Distribution Inc. (SYD), Harrisburg, Pa., and APR Supply Co., Lebanon, Pa., are expanding their cohabitation joint venture business model into the western Pennsylvania market. The companies now share 11 multi-distributor facilities throughout Pennsylvania; in four of the facilities they are also working with Industrial Piping Systems, a distributor of pipe, valve, and fitting supplies.
The surge in distributor acquisitions sweeps far past the United States
The acquisition trend that changed the face of the U.S. market in 2012 was part of a broader M&A surge around the globe.
Brazil attracted quite a bit of attention, no doubt in part because of the massive construction projects now underway in preparation for the 2016 Summer Olympics in Rio de Janeiro, soccer's 2014 World Cup, and some massive oil discoveries off its Atlantic coast. Rexel acquired Brazilian distributors Delamano and Etil; Sonepar purchased Rosa Leal, Rio de Janeiro, Brazil; and the Electrical Distribution Global Enterprise (EDGE) distributor group bought Ladder Automacao Industrial, an automation distributor based in Rio de Janeiro.
Other large global deals included Rexel's purchase of the 62-location Wilts Wholesale Electrical, Trowbridge, United Kingdom, and the 13-location Liteco, the largest distributor in Canada's Maritime Provinces; and Sonepar's acquisition of New Zealand's Corys Electrical, which has 36 locations. It's also worth noting that WESCO's acquisition of the $900 million EECOL mentioned earlier includes 57 locations in Canada and 20 in South America and that the IMARK buying/marketing group joined IMELCO, a 20-year-old consortium of 12 buying/marketing groups from 16 European countries and Australia that in 2011 had combined sales of an estimated $8.4 billion, to expand its reach outside North America. For more details on global market trends check out Electrical Wholesaling's September cover story, “The Wild World of Global Distribution,” which is available in the magazine's online archives at www.ewweb.com.
ABB's acquisition of Thomas & Betts was a startling reminder of the size of some colossal electrical manufacturers based outside the U.S. electrical market
With more than $2 billion in annual sales, Thomas & Betts Corp., Memphis, Tenn., has for a while been one of the very largest electrical manufacturers in North America. But its new parent company, the Zurich, Switzerland-based ABB, has an estimated $40 billion in electrical sales and 133,600 employees around the world. With an estimated $80 billion in electrical sales and $98.6 billion in total 2011 sales, Siemens, Munich, is even larger. And don't forget Schneider Electric, Rueil-Maison, France, which did roughly $28 billion in sales. All of these companies are more than twice the size of the largest U.S.-based electrical manufacturers, including Eaton Corp., Cleveland; ($7.8 billion electrical/$16 billion in total); Emerson Electric, St. Louis (estimated $12 billion electrical); Rockwell Automation, Milwaukee, Wis. ($6 billion); General Cable, Highland Heights, Ky.($5.87 billion); Cooper Industries, Houston ($5.4 billion before being acquired by Eaton); and Hubbell Inc., Orange, Conn. ($2.87 billion).
Grainger once again shows why it's the dominant distributor in the E-Biz arena
While most electrical distributors don't get more than 10% of their annual sales from their online storefronts, by 2015 W.W. Grainger Inc., Lake Forest, Ill., expects to be doing 40% to 50% of its total sales from its famed web-site, www.grainger.com. In the 2012 W.W. Grainger Factbook, the company had this to say about its e-commerce operations, “E-commerce is a powerful element of Grainger's multi-channel strategy, growing at twice the rate of other U.S. channels. It's the most profitable arm of the business, creating a huge opportunity for sales and earnings growth.
“Grainger has been a pioneer in business-to-business e-commerce, launching the Grainger.com website in 1995. Today, more than 27% of the company's annual revenue is generated through electronic channels, representing $2.2 billion in sales in 2011. Based on Internet sales revenue, Grainger ranked 15th in the U.S. and Canada on the Top100 e-retailers of 2011.”
And to top things off, the company recently launched a smartphone app for iPhone and Android users that will give them online ordering capabilities for the 900,000 products available on its website.
The excitement over solar and wind subsides
At press time, it was still uncertain if the solar and wind industries would be able to depend on the federal tax credits after this year that in the past few years have helped fuel so much of their growth. It's tough to figure out which way Congress will go on this one in its budget negotiations. Two other factors seemed to have tamped down enthusiasm in the solar market — the impact that the heavily subsidized Chinese photovoltaic panels have had on pricing and the fact that there hasn't really been a technological breakthrough in how effectively PV panels convert the sun's energy into electricity.
Who's who at the zoo
In the distribution world, this year's biggest promotion was the news that Kathleen Mazzarella would succeed Robert Reynolds as CEO, president and chairman of the board at Graybar Electric Co., St. Louis. Other senior-level appointments in 2012 included Tom Kulikowski being named president and CEO at Power/mation, St. Paul, Minn.; and Mike Stanfill becoming president at French Gerleman, St. Louis, taking over for William French, who became CEO.
In other distribution industry news, at Affiliated Distributors, Wayne, Pa., David Oldfather was promoted to president of the buying/marketing group's Electrical Divisions, and Duff Greenwood was named president of Cleaves-Bessmer-Marietti (CBM), Inc., Kansas City, Mo.
John Strainic is now heading up GE Lighting's North American Consumer Lighting operations; Revathi Advaithi was promoted to president-Electrical Sector, Americas Region at Eaton Corp.; at Royal Philips Electronics, Eric Rondolat was appointed CEO of Lighting and will be a member of the company's executive committee, succeeding Frans van Houten who led Philips Lighting on an interim basis; Douglas Peterson has been named president of Rittal Corp., Urbana, Ohio; and Michael Pessina is now president of Lutron Electronics, Coopersburg, Pa.
Other key appointments made at electrical manufacturers during 2012 include Jim Johnson joining Calpipe Industries, Downey, Calif., as V.P. of sales and marketing; Spencer Bolgard taking on the V.P. and general manager job at Phoenix Contact USA, Middletown, Pa.; Kathy Jo Van taking on expanded responsibilities in her position as executive V.P. of Coleman Cable's, Distribution Group; and Ron Saccomano, Westinghouse Lighting, Philadelphia, being promoted to V.P. of global business development.
2012 Distributor Acquisitions
|Jorvex SA, Peru||Anixter International Inc., Glenview, Ill.|
|Walters Wholesale Electric Supply, Signal Hill, Calif.||Consolidated Electrical Distributors Inc., Irving, Texas|
|McCullough Electric Co., Pittsburgh||Crescent Electric Supply, East Dubuque, Ill.|
|Stoneway Electric Supply, Spokane, Wash.||Crescent Electric Supply, East Dubuque, Ill.|
|Fargo Water Equipment, Fargo, N.D.||Dakota Electric Supply, Fargo, N.D.|
|W.A. Roosevelt, Madison, Wis.||Dakota Electric Supply, Fargo, N.D.|
|Ladder Automacao Industrial, Brazil||Electrical Distributors Global Enterprise (EDGE) (distributor group)|
|Electra Supply, Cambridge, Ontario||Franklin Empire, Montreal, Quebec|
|Zeller Corp., Rochester, N.Y.||Kaman Industrial Technologies (KIT), Bloomfield, Conn.|
|Mustang Electric Supply, Lewisville, Texas||Mayer Electric Supply, Birmingham, Ala.|
|Evergreen Oak Electric Supply & Sales Co., Crestwood, Ill.||Paramont Electrical Supplies, Broadview, Ill.|
|Crest Lighting (Evergreen Oak) Crestwood, Ill.||Paramont Electrical Supplies, Broadview, Ill.|
|Edison Equipment Co., Columbus, Ohio||Professional Electric Products Co. (PEPCO), Eastlake Village, Ohio|
|Liteco, Fredricton, New Brunswick||Rexel SA, Paris|
|Delamano, Brazil||Rexel SA, Paris|
|Etil, Brazil||Rexel SA, Paris|
|LaGrange, Gent, Belgium||Rexel SA, Paris|
|Munro Distributing Co., Fall River, Mass.||Rexel SA, Paris|
|Platt Electric Supply Inc., Beaverton, Ore.||Rexel SA, Paris|
|Societe Commerciale Toutelectric, Toutelectric, France||Rexel SA, Paris|
|Wilts Wholesale Electrical, Trowbridge , Great Britain||Rexel SA, Paris|
|AME Material Electrico SA, Spain||Sonepar SA, Paris (Sonepar Iberica)|
|Dixon Electric, Sudbury, Ontario||Sonepar SA, Paris|
|Rosa Leal, Rio de Janeiro, Brazil||Sonepar SA, Paris|
|Corys Electrical, Auckland, New Zealand||Sonepar SA, Paris|
|Codale Electric Supply, Salt Lake City, Utah||Sonepar SA, Paris|
|Treadway Electric Co., Little Rock, Ark.||Sonepar USA, Philadelphia (Stuart C. Irby)|
|Emerson Electric Supply Inc., Farrell, Pa.||The Hite Co., Altoona, Pa.|
|Mag-Trol Inc., Long Beach, Calif.||Turtle & Hughes Inc., Linden, N.J.|
|Warren Electric Supply, Queensbury, N.Y.||US Electrical Services, Hartford, Conn.|
|Morris Automation Group, Roanoke, Va.||Virginia Electronic Components (VEC), Charlottesvile, Va.|
|EECOL Electric Corp., Calgary, Alberta||WESCO International Inc., Pittsburgh|
|Trydor Industries, Surrey, British Columbia||WESCO International Inc., Pittsburgh|
|Conney Safety Products, Madison, Wis.||WESCO International Inc., Pittsburgh|