Distribution Solutions Group to Buy Hisco for Up to $319M

DSG will pay $269 million at closing for Hisco, which was No. 39 on MDM's 2022 Top Industrial Distributors list.
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After a relatively quiet 15 months on the distribution M&A front in terms of major deals, Distribution Solutions Group made has major news waves by announcing a landmark deal that involves a fellow MDM Top Distributor.

Chicago-based DSG said March 31 that it has reached an agreement to acquire Hisco, a market leader in the distribution of electrical and industrial supplies based in Houston. 

DSG will pay $269.1 million at closing, with a potential additional payment of up to $12.6 million. DSG will also pay $37.5 million in cash or DSG stock in retention bonuses to certain Hisco employees that remain with Hisco or its affiliates for at least 12 months after closing, which is expected to happen in 2023’s second quarter.

DSG noted that for its fiscal year ended Oct. 31, Hisco had sales in excess of $400 million and adjusted EBITDA of about $29 million.

DSG said it will combine the operations of its TestEquity unit with Hisco to create one of the largest distributors serving the electronics design, production and repair industries.

MDM PREMIUM:A Year After its Formation, A Deep Dive on Distribution Solutions Group (published March 22)

The deal announcement comes a day shy of one year after Lawson Products announced its merger with fellow distributors TestEquity and GexPro Services, and the trio was rebranded as Distribution Solutions Group one month later.

Lawson Products was No. 34 on MDM’s 2022 Top Industrial Distributors list on account of its $418 million in fiscal 2021 sales, while Hisco was No. 39 with $337 million.

“We are very excited to announce our plans for this strategic acquisition which we expect to be accretive on an adjusted basis starting in 2023,” DSG CEO and Chairman Bryan King said in a news release. “Hisco is a strong business with niche market leadership positions, a strong growth and return profile and an outstanding management team that we believe will thrive as part of DSG. The combination of TestEquity and Hisco will take a ‘best-of-both approach in terms of people, capabilities and strategies.”

Employee-owned Hisco has 38 North America locations, which includes its Precision Converting facilities and Adhesives Materials Group, as well as subsidiaries HiscoMex in Mexico and HiscoCan in Canada. It was founded in the 1940s as Houston Industrial Supply Company, and incorporated as Hisco in 1971. 

Today, Hisco’s product portfolio includes adhesives, chemicals and tapes and specialty materials such as electrostatic discharge, thermal management materials and static shielding bags. The company also offers vendor-managed inventory and RFID programs with specialized warehousing for chemical management, logistics services and cold storage.

“While our industrial technologies focus will benefit most from this combination, we are also excited about how Hisco is expected to expand DSG’s commercial opportunities and durability, enhancing our organic growth rates and providing further scale to the overall DSG platform,” King added.

“This transaction is the result of decades of hard work on the behalf of our employee-owners,” said Bob Dill, Hisco CEO “It’s also a recognition of Hisco’s deep industry relationships, innovative customer-centric solutions, and comprehensive capabilities that Hisco has developed over the course of its history. Looking ahead, the combination of TestEquity and Hisco will allow the combined business to build on our complementary capabilities and further enhance the value that Hisco, TestEquity and the DSG family of companies provide to its customers and partners.”

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