Rexel to Almost Double U.S. Sales With Plans to Acquire GE Supply

July 14, 2006
In a blockbuster acquisition that will make it the largest electrical distributor in North America, Rexel has agreed to buy GE Supply, a unit of

In a blockbuster acquisition that will make it the largest electrical distributor in North America, Rexel has agreed to buy GE Supply, a unit of General Electric, for $725 million.

The announcement ends almost a year’s worth of rumors that GE Supply was on the block. Dick Waterman, president and CEO of the newly created Rexel U.S. holding group, told EM in an exclusive interview July 11 that GE and Rexel were in discussions for the “better part of a year.” “It’s been a long time coming,” Waterman said. “I jumped into the fray when the opportunity presented itself. It’s been going on for the better part of a year.”

Rexel Inc., the North American subsidiary of Rexel SA, the largest electrical distributor in the world, posted $2.5 billion in sales in 2005. Based in Dallas, the company has 4,945 employees and 300 branches in 34 states. The company ranks as the nation’s sixth largest electrical distributor, according to EW’s 2006 Top 200 listing of electrical distributors.

With $2.2 billion in pro forma 2005 annual revenues for the transferred business to Rexel, GE Supply is a leading distributor of electrical products produced by GE and more than 200 other manufacturers. The business is headquartered in Shelton, Conn., and employs approximately 2,500 people in more than 150 locations around the world. GE Supply’s core electrical distribution activities operate mainly in the United States.

Upon closing, which Rexel anticipates in early August, GE Supply will operate in the United States through a dual-banner strategy, serving an expanded customer base with a much larger product offering and reinforced network density. GE Supply will report to the Rexel U.S. holding group headed by Waterman. Senior Vice President and CEO of GE Supply Jeff Schaper, along with his leadership team, will continue to operate the business. Dan Palumbo, who has been COO of Rexel Inc. for the last five months, will step into the position of senior vice president and CEO of Rexel Inc., Waterman’s former position. Both Schaper and Palumbo will report directly to Waterman.

Jean-Charles Pauze, chairman and CEO of Rexel said, “By welcoming this highly valuable company within the group, Rexel will double its presence in the U.S. with nearly $5 billion in sales and reinforce its leadership in the world’s largest and fast growing electrical distribution market. The acquisition of GE Supply not only increases our presence in the U.S., but demonstrates Rexel’s ability to drive consolidation of the industry. This value-enhancing investment is a logical step forward and validates the attractiveness of our business model.”

GE Supply has had a unique relationship with GE — as a subsidiary, it bought a significant amount of product from the parent company. Waterman said GE Supply would continue to deal with the Commercial and Industrial (C&I) division of GE. “There isn’t any plan to change any of the vendors. We will continue to deal with the C&I division of GE for a number of years and we also will continue to sell to the GE Co., as we did in the past.”

GE Supply and Rexel will operate independently, much like the Rexel model in Canada. In September 2000, Rexel SA entered the Canadian market by acquiring Westburne Inc. Rexel operates NEDCO and Westburne, once two large independents, separately. “What we do is we have two separate banners that will go to market independently. They, for the most part, will be pushing different product lines. For instance, Rexel in many of its territories will have Rockwell Automation, whereas the GE Supply Co. will push the GE product. And on the lighting side, I’m sure there will be differences also and maybe more so as we go down the road.

“Really we are offering the customer base two choices on major projects and two choices on day-to-day business. So we don’t plan on rolling GE Supply into Rexel and making it a mirror image of Rexel. That’s not the case. We want to have two banners.”

Waterman said Rexel will benefit from GE Supply’s large project management experience, GE Supply Logistics and GE Production Services divisions. GE supplies a different component than Rexel has been supplying, said Waterman. “It’s a more sophisticated component aimed at specific markets. I think Rexel in its entirety can take advantage of this and expand that market and give us more opportunity to grow.”

He said there are no plans at this time to close any of GE Supply’s branches. “Obviously, as you look down the road. There may be some necessity to get some synergies, but that doesn’t mean necessarily that we would close a GE Supply branch. The intent here is business as usual with all the branches and all the employees,” he said.

Rexel was acquired in 2005 by an investor group including Clayton, Dubilier & Rice, Eurazeo and Merrill Lynch Global Private Equity.

Rexel recently completed acquisitions with Electro-Material, the leading electrical wholesaler in Switzerland; ElettroBergamo (Italy); and Capitol Light and Supply, Hartford, Conn., one of New England’s largest independent electrical distributors.

The acquisition is subject to consent of Rexel’s senior lenders.