U.S.-based electrical manufacturers, distributors and reps are quite familiar with the surge in acquisitions activity over the past two years. But they may not be realize these deals are part of a much larger trend sweeping the global electrical market.
As part of its renewed focus on the international market, Electrical Wholesaling's cover story this month will explore some of the far-reaching trends reshaping the electrical business not only in the United States and Canada, but around the world as well. These trends include acquisitions of distributors by Rexel and Sonepar; the expansion through acquisitions of electrical manufacturers like ABB, Legrand, Osram, Philips and Siemens into the United States; the growth and popularity of buying/marketing groups outside the United States; and the deluge of products in the LED and solar markets that have flooded the United States in recent years. Here's a sneak preview of two of these key trends from those articles.
Distributors all over the world are being acquired by the largest global distributors. The surge in distributor acquisitions over the past two years isn't limited to the United States. We have also seen Sonepar, Rexel and WESCO make some big purchases in Brazil, Canada and the United Kingdom. There have been a surprising number of acquisitions in Brazil, no doubt due in large part to the country's long-term growth prospects as one of the largest economic engines in Latin America; the multi-billion-dollar buildup of infrastructure for soccer's 2014 World Cup; the 2014 Summer Olympics in Rio de Janeiro; and the offshore oil discoveries. These deals include Rexel's purchases of Brazilian distributors Delamano and Etil; Sonepar's purchase of Rosa Leal; and the purchase by the new Electrical Distribution Global Enterprise (EDGE) group of Ladder Automacao, a large automation distributor.
The Canadian market is more consolidated than the U.S. market, and the five largest electrical distributors in Canada represent more than 65 percent of total industry sales, according to John Kerr and Paul Eitmant of IP International. We have seen several large deals in Canada over the past two years, including the purchases by WESCO Distribution Inc., Pittsburgh, of Trydor Industries (Canada), Ltd., in Surrey, British Columbia, a utility specialist with approximately $35 million in sales and other locations in Calgary and Edmonton, and its purchase of Brews Supply, Ltd., Calgary, Alberta, a full-line distributor with a focus on Canada's booming oil sands and energy markets and locations in, Edmonton, and Fort McMurray, Alberta; and Mississauga, Ontario.
Sonepar now has an estimated 99 locations in Canada, with its most recent acquisitions of four-branch Dixon Electric, Sudbury, Ontario; and SESCO/QUESCO, Toronto. And earlier this year, Rexel added 13-location Liteco, Fredricton, New Brunswick, the largest distributor in Canada's Maritime Provinces with more than $60 million in sales. Rexel does approximately $1.5 billion in annual sales in Canada and has an estimated 221 branches and 2,200 employees in the country.
In recent years, the UK's electrical wholesaling industry has not had quite as many acquisitions as we have seen in Canada. Rexel did make a big purchase this year with its acquisition of Wilts Wholesale Electrical, Trowbridge, United Kingdom, a distributor with an estimated $75 million in sales and 62 locations. Rexel is a major force in the country, with an estimated $1.1 billion in sales and 380 locations, including branches run under the WF Electrical, Newy+Eyre, Senate, Denmans, Parker Merchanting and Wilts brands.
The other recent deal of note in the United Kingdom is the 2011 acquisition by Edmundson Ltd., Knutsford, (one of CED's operating companies), of the 90-location Electric Center, formerly owned by Wolseley. At the time of the acquisition, Electric Center did about $200 million in sales. Edmundson currently operates an estimated 340 total locations in the United Kingdom. These international distributors and the country's many thriving independents compete in the United Kingdom with another distributor with a global footprint — City Electrical Factors, which has approximately 400 locations in the U.K. and an estimated 371 branches in the United States.
Rounding out the larger distributor acquisitions outside the United States are Rexel's acquisition early this year of Société Commerciale Toutelectric, a $100 million distributor in southwest France, and the purchase by Anixter International Inc., Glenview, Ill., of Jorvex SA, a Peruvian wire and cable specialist that did an estimated $115 million in 2011 sales.
The ABB acquisition of Thomas & Betts highlights the value of a well-established U.S. distribution network. Over the years, the U.S. electrical industry has seen plenty of big-time acquisitions by foreign companies. In their day, these acquisitions were big news: Osram's 1993 purchase of Sylvania; North American Philips Lighting Corp.'s 1983 purchase of the Westinghouse Lamp Division; and the acquisitions by Siemens of Allis-Chalmers in 1978, ITE Gould in 1983 and Furnas Electric in 1996.
Legrand SA, Limoges, France, has been particularly active in the acquisition market over the past few decades. The company, which had approximately $5.3 billion in 2011 sales, has acquired several dozen electrical manufacturers, and its U.S. electrical purchases have included Pass & Seymour, Slater Electric, Ortronics, Wiremold, Cablofil, Middle Atlantic Products, Vantage Controls, Wattstopper, PW Industries and Electrorack. In total, these acquisitions provide the company with more than $1 billion in sales.
In the past year, the acquisition that has stood out the most is the $3.9 billion purchase of Thomas & Betts, Memphis, Tenn., by ABB, the European giant with approximately $38 billion in sales. The deal gave ABB access to 6,000 distributor locations and may have signaled the start of a renewed acquisition era in the U.S. electrical manufacturing community. It's a particularly interesting deal because ABB is a powerhouse in many of the European countries where direct sales are a much bigger part of the marketing strategies of electrical manufacturers, and some industry observers are eager to see how ABB handles such a large distribution network.