In 2013, private equity firms continued to be active in the distribution industry; distributors continued to expand their product and geographic reach; and they continued growth across borders.
Here are some of the biggest M&A stories – in no particular order – in the wholesale distribution industry in 2013:
MSC Industrial Supply Acquires Barnes Group’s North American Distribution Operations
Announced in February, MSC Industrial Supply's (NYSE: MSM) acquisition of Barnes' North American distribution operations (BDNA) was among the biggest deals in the industrial distribution sector. MSC purchased BDNA for $550 million.
With the deal, MSC added a complementary provider of fasteners and other high-margin consumables, as well as a vendor managed inventory solution. It also significantly broadened MSC’s reach in Canada. The transaction will contribute to MSC’s goal of reaching $4 billion in revenues by 2016, according to MSC President and CEO Erik Gershwind.
Read MDM’s analysis of the deal in this MDM Premium article: The Impact of the MSC Industrial-Barnes Deal.
MRC Global Continues Global Growth Strategy
MRC Global (NYSE: MRC) recently completed its acquisition of Stream AS in Norway for $260 million. The acquisition continues a strategy that has seen the industrial PVF distributor expand globally to meet the needs of the oil and gas industry.
Andrew Lane, MRC president and CEO, said after the latest acquisitions were announced in December: "These acquisitions continue our multi-year international growth strategy, complement our previous international acquisitions and are expected to allow us to achieve over $900 million in international segment revenues in 2014, with a target of over $1 billion in 2015.”
Sysco Announces Plans to Acquire $22B US Foods
The foodservice distribution sector consolidated further in 2013 when Sysco (NYSE: SYY) agreed to acquire another multibillion-dollar distributor, US Foods, for $3.5 billion and the assumption of $4.7 billion in debt. US Foods has about $22 billion in annual revenue; it is owned by affiliates of Clayton, Dubilier & Rice and Kohlberg Kravis Roberts & Co.
At closing, Sysco will have $65 billion in annual sales, about five times the size of the next biggest rival, according to a Wall Street Journal report.
The acquisition announcement sparked conversation among smaller customers that are concerned it will provide Sysco with even more pricing power after taking a rival out of the market.
The acquisition is scheduled to close in the third quarter of 2014. Learn more about the deal at www.bestofbothinfood.com, set up by the companies with information about the transaction.
Grainger Targets Manufacturing with Acquisitions
Chicago-based Grainger (NYSE: GWW) continued to use acquisitions to target manufacturing customers in 2013. The focus will continue. Laura Brown, senior vice president of communications and investor relations, said earlier this year: “Our continued success with manufacturing customers further reinforces our commitment to add products and services to best serve customers in this important end-market.”
Grainger acquisitions in 2013 included:
Deals Heat Up in Pharmaceutical Distribution
Cardinal Health (NYSE: CAH) and CVS Caremark announced a deal to form the largest generic drug sourcing entity in the U.S. It is a 50/50 joint venture, and both are committed to sourcing generic drugs through it. For analysis of the deal, visit Adam Fein’s Drug Channels website.
McKesson announced it would purchase European distributor Celesio to build a global healthcare services platform. The deal is seeing some headwinds after Celesio’s largest independent shareholder rejected the bid.
Also in 2013, McKesson sold its hospital automation unit to a private equity firm.
Some other distributors that were active in M&A in the past year include the following. Click to view news for each company:
For a full list of deals made in 2013, visit MDM’s distribution and manufacturing M&A article index page.