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Hughes Supply, Inc., Orlando, FL, has entered into a purchase agreement to acquire TVESCO, Inc., a Tennessee Valley-based distributor of electric utility and electrical products. TVESCO, Inc. distributes transmission and distribution (T&D) and electrical commercial and industrial (C&I) products to municipal utility, electric cooperative utility and contractor customers through 14 branches in five southeastern states. TVESCO had annual sales of approximately $138 million for the 12 months ended Dec. 31, 2004, and employs 170 full- time associates.
"We believe serving the electric utilities industry is an excellent business with very good long-term growth prospects as utility companies, in efforts to increase efficiency and productivity, are increasingly outsourcing their inventory management and procurement services to distributors," said Tom Morgan, president and CEO of Hughes Supply. "In addition, we expect a higher level of maintenance spending by utility companies with the recent passage of the Energy Bill by Congress that will require electric utilities to meet federal reliability standards for the electricity grid. The maintenance-related nature of the Utilities business, along with its use of multi-year alliance contracts with utility providers, makes it less vulnerable to construction cycles, allowing for a more predictable cash flow. Additionally, its efficient use of capital results in a higher return on invested capital than Hughes Supply's overall return.
"The acquisition of TVESCO further strengthens the geographic footprint of our Utilities and Electrical businesses by expanding into the Tennessee Valley region. Its stable base of municipal utility, rural electric cooperative utility and electrical contractor customers nicely complements our existing customer base, and its reputation for customer service excellence is well-aligned with Hughes.
"Within our portfolio of businesses, Utilities is one of the higher- growth, higher-return businesses, and with this proposed acquisition, we build our Utilities market leadership position to over $900 million in expected fiscal year 2007 sales. This acquisition allows us to continue to execute our acquisition strategy of investing in market leaders that improve overall profitability, reduce cyclicality, and that expand our geographic footprint," concluded Morgan.