Rexel, the largest electrical distributor in the world, has agreed to buy Capitol Light and Supply Co., (doing business as CLS and Capitol Light) Hartford, Conn., one of New England’s largest independent electrical distributors.
In one week, the two largest independent electrical distributors in Connecticut were sold with a combined total of about $400 million in annual sales. Electrical Wholesalers Inc., Hartford, Conn., was sold to U.S. Electrical Services, Chester Springs, Pa., a new company run by Richard Worthy, former CEO of Sonepar North America.
CLS, with 2005 sales of approximately $234 million and 415 employees at 22 locations, was ranked the nation’s 28th biggest electrical distributor, according to Electrical Wholesaling’s 2005 listing of the top electrical distributors. Capitol Light, the company’s national retail lighting business, operates in 36 states and Canada, and has distribution centers in New Haven, Conn., and Fort Worth, Texas.
The acquisition is expected to close before the end of June, pending governmental approvals. Upon closing, the business of Capitol Light and Supply will operate under the trade names Rexel CLS and Rexel Capitol Light. Bob Compagna, former CEO of CLS, will become president of the New England division of Rexel. All members of CLS/Capitol Light’s management team will remain with the business.
The acquisition of CLS marks Rexel’s entry into New England. Dick Waterman, executive vice president/CEO of Rexel, said Rexel would look at expanding farther into New England if the right opportunity arises. He said using CLS as a base for future acquisitions would be a good plan.
"As I speak at this point, I don’t have anything else," he said. "But, as we look down the road, certainly if the opportunity is the right one, we would do that."
The company has no plans for changing CLS. "They’re a pretty successful company and I think we’ll be cautious about making any significant changes," he said.
Electrical contractors account for approximately 70 percent of Capitol Light and Supply Co.’s annual sales; national retail lighting customers account for the remaining 30 percent of sales. Rexel intends to further develop Capitol Light’s national accounts model and leverage the company’s expertise in this area to expand the concept to other branches throughout the country.
Byron Brewer Jr., president of Northeast Marketing Group, an independent manufacturers’ rep in Wallingford, Conn., expects to see more consolidation in New England as a result of the recent acquisitions. "We had two big hits back-to-back in Connecticut," he said. "I think that’s only going to accelerate more consolidation in other parts of the New England marketplace."
Although Connecticut has lost its two largest independent electrical distributors, several big independent electrical distributors remain in New England: Standard Electric, Wilmington, Mass.; Granite City Electric Supply Co., Quincy, Mass.; Ralph Pill Electric Supply Co., Boston; and Rockingham Electrical Supply Co. Inc., Newington, N.H. All of the companies were part of EW’s 2005 Top 200 listing.
Brewer believes it will be increasingly difficult for the small independent to survive in the marketplace unless it "carves out a real specialized niche to make a go of it with some of these big guys."
Brewer said his agency has worked hard to drive brand preference in the marketplace. "We try to stay close to the customer and the distributor, so hopefully the brand preference we have driven in the market is still going to be important, regardless of who owns the individual distributorships. We try to stay out in front of the marketplace developing a lot of end-user and contractor relationships."
Tom Punch of Electra Spec Inc., a Bristol, Mass.-based independent manufacturers’ rep, said, "It’s an interesting phenomenon. Acquisitions have been so quiet lately, and then all of the sudden you have almost $400 million worth of distribution acquired in a one-week period of time.
"New England had a pretty strong independent presence. It’s interesting when you take Connecticut and there’s only one or two small independents left. The rest of New England still has some strong independents. Where it goes from here, I don’t know."
He said he would not be surprised if U.S. Electrical Services, Worthy’s new company, expanded with acquisitions outside of Connecticut. Following his comment, USESI did expand into New Jersey (see story on page 1). He also said he would not be surprised if Rexel/CLS continues to open more branches or acquire other independent locations.