Sonepar USA and Hagemeyer North America, both subsidiaries of Paris-based global electrical distributor Sonepar SA, announced a merger of the companies’ Capital Lighting & Supply (CLS) and Tristate Electrical & Electronics operations in the Mid-Atlantic region.
The combined business will be led by John Hardy as president.
“This is our first formal partnership endeavor since Hagemeyer North America joined the Sonepar family in 2008,” said Paul Klasing, president of Sonepar USA, in a Sonepar release. “We’re excited about joining forces for the good of our customers, associates and suppliers in the mid-Atlantic region. Because we had two strong, successful companies, some in overlapping markets, the decision to merge the companies was an easy one. Our customers will reap the benefits of expanded products, solutions and expertise, and our associates will be united to share best practices and strategies for improved growth and service. It’s a winning combination.”
Combined, the new organization will offer services from over 46 locations across Maryland, Pennsylvania, West Virginia and Virginia. For the immediate future, the locations will continue to operate under their existing Capital Lighting, Hagemeyer or Tristate brands.
The move is part of a broader consolidation of the Sonepar USA and Hagemeyer NA businesses into a single entity.
“This was always going to happen, but the economy maybe pushed it along a little faster,” Hardy told Electrical Marketing.
Hardy has been president of CLS for many years, and sold the company to Sonepar in early 2000. He stayed on to meld the six different operating companies Sonepar had in the Baltimore-Washington, D.C.-Virginia region at that time into one operation.
The combination of CLS and Tristate makes sense from the point of view not only of business coverage but also business culture, according to Hardy. “This is an incredible opportunity to use the strengths of both companies to create a position for long-term growth. Tristate is a benchmark company in the industry. They have strengths where Capital Lighting has weaknesses, and vice-versa.
“I grew up in the electrical business wanting to be like Tristate,” Hardy says. “Now that I’ve had the opportunity to meet 95 percent of the Tristate people, it’s exciting for me because they’re exactly the kind of people we want. This is good for them also, because it gives us the ability to create a brand new business together. When we merge the best practices it will be a better business, and could be a new benchmark.”
Hardy expects significant efficiencies to come from economies of scale. Both companies operate on a distribution-center model, a model that supports high levels of customer service but is also an expensive model to run. “Individually, the scale of business we each do is profitable, but put the two businesses together, and all of a sudden the scale of the business makes it far more viable,” Hardy says.
Tristate Electrical & Electronics has fed its branches out of regional distribution centers since the 1980s, and Sonepar has used central distribution centers to feed its locations in many of the regions in which it operates. In 2008, Capital Lighting opened up a 220,000- square-foot CDC near Washington, D.C.’s I-495 beltway that stocks more than 20,000 products.
Another similarity between the two companies is their expertise in merchandising. John Waltersdorf, former Tristate CEO, first started building self-service counter areas at his company’s branches in the 1950s, and Capital Lighting & Supply’s locations utilize the latest in promotional and marketing strategies to drive sales and are loaded with point-of-purchase displays.
Decisions about whether the combined business will close any locations in the five overlapping markets or reduce staff still lie ahead, said Hardy. “We haven’t been able to be involved in each other’s business. It’s our intent to create a business with long-term viability for growth and profitability.”
The consolidation will include converting Tristate to a different ERP software platform. The company is a long-time flagship user of Activant’s Prophet 21 system, while Sonepar USA’s ERP system of choice is Activant’s Eclipse. Tristate operations will convert to Eclipse by the second quarter of 2010, Hardy says.
Worldwide, Sonepar employs over 34,000 people, with 2,050 branch locations and estimated annual 2008 sales of $16 billion. Its U.S. operations produced sales of $3.3 billion in 2008, ranking No. 5 on Electrical Wholesaling’s Top 200.— Doug Chandler