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In a $250-million cash tender offer, WinWholesale, Dayton, OH, an equity partner in more than 400 local distributors across multiple industrial lines, has signed a merger agreement with Noland Company, a $550-million publicy-held, third-generation family-run distributor of plumbing, electrical, HVAC, mechanical equipment and supplies in the Southeast. WinWholesale expects to take Noland private and delist it from the NASDAQ stock exchange.
Rare is the match made in heaven, but this deal offers the Noland family a golden exit strategy, investors a huge premium and reward for extreme patience with the stock for many years, and WinWholesale a very compatible growth platform, not to mention an immediate 40% revenue bump. Potentially, customers and employees gain a continued strong local service model with a stronger infrastructure behind it.
Strategically the deal gives WinWholesale a regional piece in the Southeast to fill in its current coverage in 41 states, primarily in the Northeast, Midwest and West. Noland has 101 facilities in 13 states, primarily in the Southeast. From a product standpoint, both companies are diverse, with plumbing supplies making up an estimated two-thirds of WinWholesale's revenues and roughly 56 percent of Noland's revenues in 2004.
The fit looks good on a few different operational levels as well. The two companies both operate on IBM hardware platforms, each with internally developed software. "From our perspective, it makes it a potentially easier integration between the existing systems," Bruce Anderson, a WinWholesale spokesman, told MDM. And culturally, both companies share a long-term paternalistic management structure. WinWholesale's founder was president from 1956 until 1998.
A Different Model
WinWholesale is a little different animal than most traditional distributors. Its parent, Primus Inc., is in a private-equity partnership with more than 400 corporations, where it controls a majority interest in each of the companies; the individual company presidents and top executives hold the minority interest. Primus provides back-office functions, including data processing, payroll, insurance, group buying and other distribution/overhead expense items. Its fee to partner companies is 4.5% of gross margins.
WinWholesale, incorporated as Primus Inc., has annual revenues of $1.4 billion and is dedicated to local, entrepreneurial ownership. It operates across eight different product segments, each with its branded name: The collection of independent corporations sell plumbing supplies (Winnelson), industrial PVF (Windustrial), heating and cooling materials (Winair), electrical equipment (Winlectric), waterworks supplies (Winwater Works), pumps (Winpump), fasteners (Winfastener), and electronics (Wintronic). Each of the 400-plus operating units averages about $3 million in annual revenues, with a range from under $2 million to $15 million.
Noland will continue to operate in its current branch structure under its current name until WinWholesale develops a plan to integrate and develop each local unit, Anderson said. It's also too early to tell how current Noland branches will look as far as product mix; most WinWholesale businesses operate into specific verticals.
What a Deal!
Under the terms of the agreement, unanimously approved by both companies' boards of directors and by a special committee of the board of directors of Noland Company, WinWholesale will pay $74.00 in cash for each Noland Company share. Noland had 3,384,386 shares