Teaming Up for Hagemeyer

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Hagemeyer: Sonepar's Bid Is Too Low

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October 25, 2007

Teaming Up for Hagemeyer

A bidding war has possibly been avoided in the fight for Dutch electrical/industrial distributor Hagemeyer’s global assets. Rexel just bid nearly $4.3 billion for the company, but plans to only keep a little over half of Hagemeyer when all is said and done. Sonepar has agreed to buy the rest.

In an interesting twist, French-based distributor Rexel has made an offer to acquire Hagemeyer, and has agreed to sell certain assets of Hagemeyer to Sonepar if its offer is accepted.

The move eliminates the possibility of a bidding war between the two electrical distribution giants. It also plays down the risk of buying the entire company.

Rexel’s offer was made for €4.60 euro a share in cash, valuing Hagemeyer at €3 billion euro, a 47 percent premium over Hagemeyer’s average share price for the one-month period prior to Sonepar’s Oct. 9 offer. (At the current exchange rate of $1.40=€1, the valuation is US$4.3 billion.)

Hagemeyer has rejected Rexel’s offer but has agreed to meet with Rexel.

Rexel has agreed to sell the American, Asian-Pacific and selected European activities of Hagemeyer to Sonepar. If done, Hagemeyer’s American assets would complement Sonepar’s current business in the U.S., which is focused mainly on contractors. Hagemeyer is focused mainly on the industrial markets.

Before this bid, Sonepar had estimated it would reach $3 billion in the U.S. in 2007. Sonepar says Hagemeyer’s assets would strengthen its North American operations overall from €2.6 billion (US$3.7 billion) to €4 billion (US$5.7 billion).

For Rexel’s part, it would acquire Hagemeyer’s Professional Products & Services (PPS) activities in the Baltic countries, Belgium, the Czech Republic, Finland, Germany, Ireland, the Netherlands, Norway, Poland, Russia, Slovakia, Spain, and the United Kingdom, as well as Hagemeyer’s ACE activities. After the transaction, Europe would represent more than 50 percent of Rexel’s global revenues. Currently, North America represents 50 percent.

The resulting increase to Rexel’s sales, on a 2006 pro forma basis, is estimated at €3.6 billion (US$5.14 billion).

In response to Rexel’s bid, Sonepar has withdrawn its offer for Hagemeyer and has entered into an agreement to acquire the above assets from Rexel instead. Sonepar estimates the acquisition would add €2.7 billion (US$3.85 billion).

Sonepar would selectively reinforce its footprint in Europe by acquiring assets in Austria, Sweden and Switzerland, representing turnover of more than €700 million.

In a release, Hagemeyer said that it has “strong confidence in the company’s strategy and its future and are convinced that the continuing improvement in Hagemeyer’s performance and profitability can realize value substantially higher than the €4.60 per share offered by Rexel.”

From the release, it seems Hagemeyer does see potential in being acquired by either Sonepar, which bid €4.25 a share earlier this month, or Rexel. The company says a potential combination will lead to “significant revenue and cost synergy benefits for the acquirer and, in the event of a transaction, Hagemeyer and its shareholders should receive their fair share of the value.”

According to Bloomberg, speculation of a Rexel bid has increased Hagemeyer shares by 67 percent in the past month.

Sales in 2006 for the three companies: Hagemeyer NV, $8 billion; Sonepar, $12.5 billion; and Rexel $12.5 billion. In North America: Hagemeyer, $2 billion; Sonepar, $2.4 billion; and Rexel, $6 billion.

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