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Tightened Credit Markets, Economy Played Role in IDG Deal

May 21, 2008

The tightened credit markets and the economic downturn were center stage in the bidding for Industrial Distribution Group Inc., Atlanta, GA, according to a proxy statement filed this week by IDG with the SEC about the distributor's plan to be acquired by Luther King Capital Management.
In fact, Platinum Equity, which was originally the winning bidder for the industrial distributor, had first bid $12 a share in December 2007 but reduced its offer to $10 a share in mid-January. The private equity firm cited risk in improving IDG's MROP and integrated supply business due to an overall decline in the industrial economy.
This prompted investment banking firm Robert W. Baird &Co. to return to five bidders for new written proposals. Among the five bidders was WESCO, whose bid, according to the filing, was contingent on finding $30 million or more of sustainable SG&A savings and sales synergies" after acquiring the distributor.
This time around, the bidders were offering "significantly reduced purchase prices." According to the proxy statement, the lower offers were likely due to a deteriorating lending environment and general economic conditions, the general decline in stock prices of IDG's competitors, and the overall decline in broader market indices.
As MDM has reported, Platinum did not end up winning the bidding war for the distributor, which recently reported a 5.7% sales decline in the first quarter. Luther King Capital Management made its first public bid April 4, and its final winning bid of $12.10 a share April 22.
Here's a link to the full proxy statement filed by IDG. It is also available on the distributor's Web site,

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