Platinum Equity to Buy Industrial Distribution Group for $113M

Platinum Equity has agreed to buy Industrial Distribution Group, Inc., Atlanta, GA, distributor of maintenance, repair, operating and production (MROP) products and integrated supply services to manufacturers and other industrial users, for about $113 million. With the acquisition, IDG will go private.
 
The move complement's Platinum Equity's other recent distribution investment: Strategic Distribution. Platinum Equity said it would look for synergies with IDG. Both companies have integrated supply operations.
 
We are very enthused about this transaction with Platinum Equity, which we believe will provide excellent value to our stockholders," said Richard M. Seigel, chairman of the Board of the Company, who also chaired the special committee.
 
Seigel said in August 2007, when IDG first announced it was considering "strategic alternatives" for the company, that "IDG needs to consistently grow revenues at a higher level while also seeking a strategic way to reduce its cost profile, both of which have been a source of concern."

In the third quarter ended Oct. 30, 2007, IDG reported sales had reached $402 million for the first nine months, down 3% from the prior year. At the time, integrated supply revenues (IDG's Flexible Procurement Solutions) was 61% of total sales.


IDG was formed in 1997 through a rollup of nine industrial general-line distributors. (See timeline below.) It has seen its share of integration challenges. The company, which eventually grew to include 26 operating companies, runs out of four divisions. Since taking the helm in November 2005, CEO Charles Lingenfelter has been working to take the distributor from four divisions to one company via the One Company strategy.


Lingenfelter told MDM in July 2007 that one of the hardest parts of a rollup is integrating culture: "You have to think, act and operate as one, and rollups never took that into account. If you don't do that you don't get the economies of scale necessary to make a rollup financially successful."
 
"We are pleased with the new and exciting opportunities that being a part of Platinum Equity will offer our company and our customers," said Lingenfelter. "We believe that Platinum Equity's service industry focus will provide a great fit for our Company and constituents."
 
IDG is in 49 states and has a presence in 43 of the top 75 manufacturing markets in the U.S. and China.

History of IDG
Industrial Distribution Group Inc., Atlanta, GA, is a nationwide distributor of MROP products, including cutting tools, hand and power tools, abrasives, material handling equipment, coolants, lubricants and safety products. The company also provides an integrated supply service -comprising roughly 60 percent of its overall revenues -called Flexible Procurement Solutions.


1997
Industrial Distribution Group is formed from nine general-line industrial distribution companies. Together the companies have about $250 million in annual revenues. IDG is taken public in an initial public offering. At this time, principals plan to consolidate only certain corporate functions but use a decentralized management structure at each subsidiary. CEO brought in from outside industrial distribution: Martin Pinson, formerly executive vice president and CFO of U.S. Office Products Company, which was also a roll-up.

1998
IDG adds 17 companies to its portfolio, for a total of 26 operating companies with annualized revenues of close to $572 million.

1999
Pat O'Keefe was brought in from outside industrial distribution to be CEO.

2001
Andrew Shearer, a founding member of IDG, is named president and CEO. He had served since 1991 as president of the IDG York business unit, formerly Shearer Industrial Supply. Shearer brings number of business divisions from 13 to four, plus a

specialty cutting tool business unit.

2005
Charles Lingenfelter, a founding member of IDG and president of IDG's Southern region, is tapped to replace Shearer as president and CEO. Lingenfelter creates the One Company strategy to further integrate the four remaining geographic operating divisions.

2007
Appoints special committee to consider "strategic alternatives." Hires Robert W. Baird &Co. to serve as financial advisor.
 
2008
IDG agrees to be purchased by Platinum Equity, which also owns Strategic Distribution.