With an eye on expanding outside of the Southeast, Hughes Supply Inc., Orlando, agreed to acquire Utiliserve Holdings Inc., and its subsidiaries, including Utiliserve Inc., a Corinth, Texas, electrical transmission and distribution products distributor. The stock purchase deal is valued at about $90 million in cash.
Utiliserve Inc. was formed in 1999 when Temple Holding Co., Corinth, Texas, acquired Vanyo Inc., Somerset, Pa.; Power Supply Inc., Matthews, N.C.; National PowerX, Solon, Ohio; and Rigby Electric Supply, Kingstree, S.C. Utiliserve Inc. also includes two related divisions, metering and recloser/hydraulic tool repairs.
Utiliserve, which expects to generate sales of approximately $230 million for the year ending Dec. 31, 2002, serves public/municipal utility districts, rural electric cooperatives and investor-owned utilities located in 15 states in the Central, Southwest and Mid-Atlantic regions of the United States. Utiliserve's majority shareholder is Code Hennessy and Simmons, a Chicago-based private investment firm which, along with management, acquired Utiliserve in 1997.
Hughes has more than 439 locations in 34 states. In its fiscal year ended Jan. 25, Hughes sales reached $3.04 billion. Before the acquisition, Hughes did about 6 percent of its business in utility products. The acquisition would increase its utility product sales to about 13 percent, said Steve Zepf, Hughes' chief financial officer. The acquisition would also expand Hughes's geographic coverage to include the East Coast and some new states in the West, he said. The new markets for utilities will be Delaware, Kansas, Missouri, North Carolina, Oklahoma, Pennsylvania, South Carolina, Texas and Virginia.
Rick McClure, president of Utiliserve Inc., said, “Since the initial acquisition in 1997 of the core business which has become Utiliserve, our management group has achieved tremendous financial and operational growth and success. By becoming part of the Hughes family, we have an opportunity to continue that growth and success with an industry leader that has a strong balance sheet. We believe that our customers, employees and vendors will benefit from the synergies we will gain from joining Hughes.”
David H. Hughes, CEO and chairman of the board of Hughes Supply, said, “As part of our ongoing growth strategy, the acquisition of Utiliserve is an excellent strategic fit both geographically and through complementary vendor relationships. Our financial strength will also allow us to accelerate the growth of our combined businesses through the use of utility alliance contracts and other value-added services.”
Hughes currently operates its utility business as a separate division of its electrical group, according to Zepf. He would not comment on whether the company plans to make any changes in how it operates its utility business once it completes the acquisition.
The board of directors of Hughes Supply has unanimously approved the stock purchase agreement. Hughes expects the deal to close in early August, pending regulatory approvals and other customary closing conditions.