Sonepar USA CEO Tony Burr recently spoke with MDM on the distributor’s plans to buy Hagemeyer assets, the state of the economy and the impact of copper and fuel prices on the electrical distributor’s business. In this article, Burr says Sonepar will treat the acquisition of certain Hagemeyer assets much like it does other acquisitions by keeping management and the company’s way of doing things in place.
 
Sonepar will likely keep Hagemeyer as a standalone operation after acquiring certain of its assets from Rexel. The plan will probably be to keep it as a standalone operation,”Tony Burr, Sonepar USA CEO, tells MDM. “It has a different customer base, predominantly, and a different market approach.”
 
Sonepar USA’s parent company -Paris-based Sonepar -has agreed to buy Hagemeyer’s North American, Asian-Pacific and selected European businesses from Rexel, which just bought the Dutch distributor for $4.7 billion. The transaction will take place before the end of the year.
 
“The strength of our group is letting people have their way in the market,”Burr says. “We’ve done that with all of our major acquisitions over here. That’s why we retain the trading name of the businesses who join us.”
 
Sonepar Group is a family-owned electrical distributor with $15.3 billion in annual sales. The company operates in 29 countries on four continents.
 
“From a group perspective, it’s great to have them in the team,”Burr says. “It’s great that we’re now going to be in Australia, and that we’re going to strengthen our position in Germany, Sweden, China and that we will enter new markets.”
 
Hagemeyer’s U.S. History
Hagemeyer built its North American presence significantly starting in 1999 when it bought Cameron &Barkley Co. (CamBar), at the time an $850 million distributor that brought its core competency of integrated supply into Hagemeyer’s fold.
 
CamBar joined Tristate Electrical &Electronics Supply Company and Vallen Safety Supply Company, which were acquired in 1999 and had revenues respectively of $450 million and $200 million. In 2002, Hagemeyer North America reached $1.9 billion in sales. In North America, close to 85 percent of Hagemeyer’s sales are to industrial customers. The rest of the sales go to contractors. A large portion of Hagemeyer’s sales are in integrated supply contracts, mostly non-electrical products.
 
Based on 2007 sales of both companies, the merger of Sonepar and Hagemeyer assets would create a roughly US$19 billion global company.
 
What’s In a Name?
Burr says he does not yet know if Sonepar will be able to hold onto the Hagemeyer name as Rexel has part of the company as well. Sonepar also has the option of diverting back to the names companies operated under before being acquired by Hagemeyer, including Tristate and CamBar.
 
“I always felt there was value over here in the brand names we bought in the States. None of our businesses trade under the Sonepar name, but we have a strong relationship with the Sonepar brand, being a worldwide entity,”Burr says.  “The name Sonepar USA is the umbrella. But in the local marketplace, if you asked a customer who they trade with, they’d say, ‘Irby,’or ‘I trade with Crawford,’or ‘I trade with Capital.’
 
“… I think you only change the name of a company if there’s a market demand to do so.”
 
“We don’t go in and swallow the business,”Burr says of Sonepar’s operating structure. “We go in and support what’s already in place. We look at building on the best.”
 
Sonepar plans to keep Hagemeyer’s management in place. “It’s attractive, because we’ll get a different pool of talent coming into the group with different ideas and different concepts,” Burr says. “We’ll find there will be some good things going on in Hagemeyer that we’re not doing, and I’m sure that there will be some good things going on throughout Sonepar that they’ll learn from.”
 
Consolidation
“(The deal) moves Rexel and Sonepar well ahead in the worldwide role of electrical distribution,”Burr says. “I think in some markets, it does consolidate markets quite a lot. But I think the American market is still very fragmented.”
 
Burr recognizes that Sonepar USA does not push ahead in its standings among other large electrical distributors, but the gap has closed -“There was a gap (in revenues) between the top distributors and us. Now we have grown closer to the top distributors.”
 
Consolidation in general can help companies reach more customers more efficiently. With this deal, Sonepar can better service national accounts, even though its primary focus is on local and regional markets. “We’ll be in a stronger position to do more of this,” Burr says, “and work on organic growth.”