Rexel Expands Global Reach with Deals for Distributors in China, India and Brazil

Jan. 28, 2011
In most discussions of high-growth developing markets, the BRIC countries are often mentioned as the key opportunities

In most discussions of high-growth developing markets, the BRIC countries are often mentioned as the key opportunities. Brazil, Russia, India and China have demographic power and huge emerging middle-class populations hungry for infrastructure and technology — cars, appliances and the rest of the conveniences of modern life in the industrialized world.

Clearly the BRIC countries have been on the mind of Rexel, Paris, France. The global electrical distribution giant nailed three-quarters of a grand slam over the past couple of weeks with announcements of acquisitions in three of the four BRIC markets.

Most significantly, the company bought Nortel Suprimentos Industriais, which allows Rexel to enter the Brazilian market with one of the top-three national electrical distributors in an otherwise heavily fragmented market.

Brazil is one of Rexel’s key priorities, both because of the size of its domestic market and its growth rate, the company said in announcing the deals. The Brazilian electrical distribution market is estimated at approximately €2 billion ($2.7 billion) in 2010. Brazil’s strong economic potential and wealth in raw materials, combined with opportunities linked to hosting the Soccer World Cup in 2014 and the Summer Olympic Games in 2016, offer sustained growth prospects for the coming years, Rexel said in a release.

Its initial 75 percent stake in Nortel Suprimentos Industriais gives Rexel a leadership position in the state of São Paulo, the richest and the most populous Brazilian state, accounting for one-third of Brazil’s GDP and 22 percent of the nation’s population. Under terms of the deal, Rexel will acquire the remaining 25 percent of Nortel in 2013. Nortel employs around 600 people and operates through 49 branches and 3 distribution centers. The company posted sales of approximately €110 million ($150 million) in 2010.

Rexel also made its first move into the massive markets of India with the purchase of Yantra Automation in Pune, India, with branch offices in Mumbai, Vapi and Baroda. Yantra is a Rockwell Automation distributor with a strong engineering emphasis in western India’s automation and control market.

In China, Rexel acquired Beijing Lucky Well Zhineng, a family-owned electrical distributor focused on the industrial automation market, strengthening Rexel’s existing footprint in China, especially in Beijing and Tianjin provinces.

Altogether, the acquisitions reinforce sales in emerging countries by about €140 million ($192 million) annually, provide entry to India and Brazil, that have high growth potential, profitability above Rexel’s group average and in which its major international suppliers are expanding their business, Rexel said.