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MDM June 25, 2007
This is the pdf of this issue of Modern Distribution Management. Apply the full $24.95 pay-per-view cost toward an annual subscription (within 30 days of purchase), which includes two issues a month plus access to more than six years of online archives and market data. Call 1-888-742-5060 or email info@mdm.com to ...
Free
Hagemeyer CEO to Resign in ’08
Hagemeyer, Naarden, the Netherlands, announced that Rudi de Becker will resign as CEO and chairman of the Board of Management of Hagemeyer at the next annual general meeting of shareholders in April 2008.
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Hagemeyer said that De Becker wants to spend more time with his family.
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Commenting on the resignation of de Becker, Adri Baan, chairman of the Supervisory Board said: Rudi de Becker joined Hagemeyer after a period of financial difficulties and he has made a significant contribution to Hagemeyer's recovery. We regret but respect his decision and we trust that a suitable successor will be found."
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Hagemeyer is a distributor of electrical parts and supplies, safety and other MRO products in 25 countries in Europe, North America and ...
Top Distributor Sectors
SKF Acquires Baker Instruments Co.
SKF has acquired Baker Instruments Company, Fort Collins, CO, a manufacturer of test and diagnostic instruments for electric motor assessment. Baker has sales of $11 million.
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This move into electric motor diagnostics is important to our new Energy Efficiency solutions business, and is in line with the SKF Group's move towards supporting our customers in their Sustainability efforts," said Phil Knights, president, SKF Service Division.
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Baker's sales are mainly focused on the industrial motor users in the U.S.
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SKF paid $14 million for the company. Baker will be part of SKF Reliability Systems within the Service ...
Top Distributor Sectors
VWR International, Inc. Acquires Denmark-based Distributor
VWR International, Inc., West Chester, PA, a supplier to the global research laboratory industry, has agreed to acquire Bie & Berntsen A-S, a Danish scientific laboratory supply distributor.
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Bie & Berntsen is one of Denmark's largest suppliers of chemical and laboratory equipment with 90 employees, all in Denmark. The company has annual revenues of US$27 million.
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Manuel Brocke-Benz, VWR senior vice president and managing director of European operations, said: The combination of VWR International and Bie & Berntsen is a perfect fit. VWR's expertise in chemicals, consumables and life science products, combined with Bie & Berntsen's emphasis on instruments, equipment and technical service, will enhance our product and service offerings to our customers and ...
Top Distributor Sectors
Schneider Enters Negotiations to Sell Unit to Eaton
Schneider Electric has entered into exclusive negotiations with diversified industrial manufacturer Eaton Corp. for the divestment of MGE UPS Systems. The expected move is to fulfill a commitment to the European Commission following the acquisition of American Power Conversion.
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Eaton is offering 425 million euros (US$569 million) for the business, which had revenues of 156 million euros (US$209 million) in 2006.
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MGE UPS Systems, a Schneider subsidiary, is a supplier of a full range of equipment: uninterruptible power supplies, static transfer switches, harmonic filters and advanced power management solutions. It has customers in more than 100 ...
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New Owners: HD Supply Will Maintain Acquisitive Strategy
HD Supply's new owners said that it is premature to say whether they will divest any of the $12 billion distributor's assets after taking full ownership, said David Novak, a partner at Clayton Dubilier & Rice, one of the three private equity firms that have agreed to buy the unit from The Home Depot Inc. for $10.3 billion.
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Bain Capital LLC, Carlyle Group and CD & R are splitting the investment evenly, Novak said.
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Though there are no immediate plans for HD Supply's current assets, the new owners do plan to continue building the company through acquisitions. That we will certainly do," Novak told MDM. "Local scale is very important for productivity and service levels."
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That means that HD Supply, with $12 billion in sales in 2006, will continue ...
Top Distributor Sectors
Reliance Steel Agrees to Buy Clayton Metals
Reliance Steel & Aluminum Co., Los Angeles, CA, has agreed to acquire Clayton Metals, Inc., Wood Dale, IL.
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Clayton Metals specializes primarily in the processing and distribution of aluminum, stainless steel and red metal flat-rolled products, custom extrusions and aluminum circles through its metals service center locations in Wood Dale, IL; Cerritos, CA; High Point, NC and Parsippany, NJ.
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Clayton Metal's sales for the 12 months ended Dec. 31, 2006, were about $123 million. Current management is expected to remain in place.
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Reliance Steel & Aluminum Co. is one of the largest metals service center companies in the U.S. Through a network of more than 180 locations in 37 states and Belgium, Canada, China and South Korea, the company ...
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Home Depot: Selling Supply Not an Easy Decision
Home Depot CEO Frank Blake said Wednesday that selling HD Supply in pieces would have been&nbsp ; time-consuming and&nbsp ; distracting, with an added cost of separating the businesses. An IPO would have resulted in a multiple discount relative to the sale of the entire business.
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This was not an easy decision," Blake said about the announcement Tuesday that Home Depot would sell its $12 billion wholesale division in its entirety for $10.3 billion to a group of three private equity firms. "(HD Supply chief) Joe DeAngelo and his team have built a world-class operation over the last few years. We gave careful consideration to a number of options, including holding onto the business."
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The three private equity firms buying HD Supply for roughly 10X-12X EBITDA are ...
Finance
Takeaways from the $10B HD Supply Deal
Home Depot's announcement that it is selling its wholesale division HD Supply for $10.3 billion to a trio of private equity firms -Bain Capital, Carlyle Group and Clayton Dubilier & Rice -is hardly a surprise, given the media coverage that led up to it. Though we don't know all the details yet, there are already a few takeaways from the news:
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1. As Grainger President and COO Jim Ryan said in mid-May (Grainger: Consolidation is Changing Marketplace), just because HD Supply has been been sold does not mean that it disappears as a player in the market. Still, HD Supply's new owners will have the same ...
Top Distributor Sectors
Housing Starts Down From April
The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for May 2007:
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Building Permits
Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,501,000. This is 3% above the revised April rate of 1,457,000, but is 21.7% below the revised May 2006 estimate of 1,918,000.
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Single-family authorizations in May were at a rate of 1,056,000; this is 1.8% below the April figure of 1,075,000. Authorizations of units in buildings with five units or more were at a rate of 379,000 in May.
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Housing Starts
Privately-owned housing starts in May were at a seasonally adjusted annual rate of ...
Top Distributor Sectors
Actuant Reports 22% Sales Increase
Actuant Corporation, Milwaukee, WI, reported sales of $385 million for the third quarter ended May 31, 2007, up 22% over the same period a year ago. Net earnings were $29.6 million, about the same as a year ago.
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The Industrial Segment generated double-digit core sales growth while the Actuation Systems Segment reported a year-over-year sales decline due to prior-year convertible top launches and the North American heavy duty truck pre-buy.
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Sales for the nine months ended May 31, 2007 were $1.069 billion, or 22% higher than the $877 million in the comparable prior-year period. Excluding the impact of foreign currency rate changes and sales from acquired businesses, core sales increased ...
Subscriber Only
Home Depot to Sell HD Supply for $10.3B (updated)

The Home Depot, Atlanta, GA, has agreed to sell HD Supply to a team of private equity firms -Bain Capital LLC, Carlyle Group and Clayton Dubilier & Rice Inc. -for $10.3 billion, or roughly 10X-12X EBITDA.
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The sale has been expected for weeks now, with a number of private equity firms rumored to have bid for the unit and several to have bowed out due to the down housing market -one of HD Supply's key customer bases. HD Supply reported a decrease in organic sales in the recent quarter.
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For that reason, the firms likely paid closer to 12X EBITDA, according to Jim Miller, principal and a managing director at investment banking firm Vetus Partners, Cleveland, OH. When they started this process, I believe they were touting approximately $1 billion of EBITDA ...
Top Distributor Sectors
Eaton Buys Pulizzi Engineering
Diversified industrial manufacturer Eaton Corporation, Cleveland, OH, has acquired Pulizzi Engineering, a manufacturer of AC power distribution, AC power sequencing, redundant power and remote-reboot power management systems. Pulizzi Engineering had 2006 sales of $12 million and is in Santa Ana, CA.
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Eaton Corporation is a diversified industrial manufacturer with 2006 sales of $12.4 billion. ...
Economic Trends
Profits for Electrical Distributors Rise Sharply in 2006
Profits for electrical distributors in 2006 rose sharply to the highest level since 1993, reaching a median of 3.7%, according to the National Association of Electrical Distributors in its annual Performance Analysis Report (PAR).
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The 3.7% figure represents the third consecutive year of sharp rises in profit margins, compared to medians of 2.9% in 2005, 2.1% in 2004, and 1.3% in 2004. Among a select group of high profit" distributors, the 2006 profit margin was almost twice as high at 7.3%.
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Accompanying the increased profits were 2006 median sales increases of 17.4%, also the highest in a decade, and higher than the 11.1% increase recorded in 2005.
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The report's author, Dr. Al Bates of Profit Planning Group in Boulder, CO, cautioned that a ...
Top Distributor Sectors
Timken Raises Prices on Bar, Tubing Products
The Timken Company, Canton, OH, has increased prices on double and triple thermal treated product, effective with shipments from Jan. 1, 2008. Bar product prices will increase by $50 a ton, and tubing product prices will go up by 10%.
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Prices on as-rolled and single thermal treated products are not affected.
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Timken is a $5 billion manufacturer operating in 26 countries and 25,000 ...
Subscriber Only
Canadian Manufacturing Shipments Down in April
Following a strong gain in March, Canadian manufacturing shipments edged down in April. Shipments decreased by&nbsp ; 0.6% to an estimated&nbsp ; $49.7&nbsp ; billion.
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Excluding the motor vehicle parts and accessory industries, manufacturing shipments increased&nbsp ; 1% in April.
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At&nbsp ; 1997&nbsp ; prices, shipments rose&nbsp ; 0.5% to&nbsp ; $45&nbsp ; billion. The constant dollar measurement takes price fluctuations into account. This was the fifth volume advance in six months.

Shipments declined in&nbsp ; 12&nbsp ; of&nbsp ; 21&nbsp ; manufacturing industries, which represent about&nbsp ; 51% of total output.
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Shipments of non-durable goods increased for the third consecutive month in April, rising&nbsp ; 0.7% to&nbsp ; $22.5&nbsp ...
Finance
Report: HD Supply Final Bids Due Today

Bloomberg News has reported that two groups of private equity firms are prepared to submit final bids&nbsp ; of $10 billion&nbsp ; for Home Depot's wholesale business, HD Supply. They are: Bain Capital LLC, Carlyle Group and Clayton Dubilier & Rice Inc.; and the pairing of&nbsp ; Thomas H. Lee Partners LP and CCMP Capital Advisors LLC.


Final bids are apparently due Friday. This report is similar to that reported by MDM&nbsp ; in early March.


Clayton Dubilier & Rice is the most recognizable among the teams in the distribution world, as it most recently invested in global electrical distributor Rexel Inc., and recently <a ...
Economic Trends
Industrial Production Unchanged in May
Industrial production was unchanged in May after a smaller revised increase of 0.4 percent in April. Output in the manufacturing sector edged up 0.1 percent in May, and mining output moved up 0.5 percent after declining 0.6 percent in April.
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At 112.7 percent of its 2002 average, overall industrial production for May was 1.6 percent above its year-earlier level. The rate of capacity utilization for total industry fell 0.2 percentage point, to 81.3 percent, a level 0.3 percentage point above its 1972-2006 average.
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Market Groups
The output of consumer goods decreased 0.2 percent in May after having risen 0.8 percent in April. The production of consumer durables edged down 0.1 percent in May, and the output of nondurables fell 0.3 percent. ...
Subscriber Only
Wholesale Prices Rise 0.9% in May

The Producer Price Index for Finished Goods increased 0.9 percent in May, the Bureau of Labor Statistics of the U.S. Department of Labor reported. This advance followed a 0.7-percent rise in April and a 1.0-percent increase in March.

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The index for finished goods excluding foods and energy moved up 0.2 percent in May after remaining unchanged in April. At the earlier stages of processing, prices received by producers of intermediate goods increased 1.1 percent in May after advancing 0.9 percent a month earlier, and the crude goods index turned up 2.0 percent following a decline of 1.5 percent in April.
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Among finished goods, the index for consumer goods less foods and energy moved up 0.3 percent in May after inching down 0.1 percent in the previous ...
Top Distributor Sectors
US Electrical Services Acquires Pioneer Electric Supply
US Electrical Services, LLC, Exton, PA, has acquired Pioneer Electric Supply, Beltsville, MD.

Pioneer has been supplying the needs of electrical contractors in greater Washington, DC for almost 16 years.&nbsp ; The company focuses primarily on large and small new construction and renovation projects.&nbsp ;
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Pioneer will join four other area USESI-owned locations in the area.

By joining Electrical Wholesalers, we are able to compliment our strong project job capabilities with EW's impressive warehousing and logistics capabilities.&nbsp ; Our customers and employees both benefit in a big way," said Jeff Bacon, who along with all Pioneer employees, will remain with the business.

"Pioneer has a great team, a great history of strong customer ...

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