Rexel has made headlines with its 2006 acquisition of GE Supply (now Gexpro) and Hagemeyer earlier this year. As part of that deal, Rexel sold Hagemeyer’s U.S. operations to Sonepar, another global competitor. According to Dick Waterman, executive vice president and CEO, International Electric Supply Corp., Dallas, the U.S. holding company that oversees Rexel Inc. and Gexpro, the company will continue to make strategic acquisitions, although probably not on the grand scale of the GE Supply and Hagemeyer blockbusters. Here are some highlights of an interview with Waterman.
Q: Rexel recently made big news with the acquisition of Hagemeyer. Had Rexel been eying Hagemeyer for a long time?
We had been looking at it for quite some time prior to any announcements. In our strategic planning, we looked at the possibility for more than a year. I’m not saying there was contact or anything. We had looked at it internally. Rexel’s offer for Hagemeyer is driven by strong industrial rationale. Sonepar’s bid on Oct. 9 created the opportunity to elaborate the proposed offer; an all-cash offer conducted by Rexel with a separate agreement to sell selected assets to Sonepar.
Q: In what areas of Europe did Rexel gain a presence with the acquisition of Hagemeyer?
After the acquisition and the divestiture, the change that happens in Europe would represent about 57 percent of Rexel’s total revenue. Currently it’s about 44 percent. So we gained a new presence in Norway, Sweden, and the three Baltic countries. What it does is it gives us a major position in markets where we had low presence, and that’s UK and Spain. The transaction also allows us to reinforce our No. 1 position in Czech Republic and Slovakia. Most importantly, we increase our presence in such large and rapidly growing markets as Russia and Poland.
Q: Rexel agreed to sell Sonepar Hagemeyer’s U.S. operations. Was this a difficult move for Rexel since there probably were some U.S. locations that Rexel would have welcomed?
The main objective was to strengthen our position in Europe, and the easiest way to do it was to pass on the United States and avoid antitrust issues. Don’t get me wrong — the United States is a leading market for Rexel and we still hold the leading position, post-transaction, based on us acquiring Gexpro, or GE Supply, as it was called at the time of the acquisition.
Q:What’s next for Rexel? Are there areas of the United States where you are still looking to expand or fill in?
It (the United States) still remains a very key market for the overall company. Gexpro created the No. 1 position for us, and we’re still very much focused on a successful completion of the integration plan that we put together. We’re ahead of schedule on that. We will continue to make bolt-on acquisitions in the United States and if something wonderful presented itself, I’m sure we would have a look at it.
Q: Do you think acquisitions may slow down right now just because you have so much to digest?
I’m not sure they will slow down because an acquisition is an opportunity issue and you have to take advantage of an opportunity when it presents itself. We handled the Gexpro acquisition integration very well and to grow our profitability during that period of time during a tough economy is quite an achievement. We will continue to make acquisitions.
Q: Can you give us more details on the Gexpro acquisition?
First of all, it was a unique opportunity for Rexel to become the No. 1 distributor in the United States and in the biggest market in the world. I think that was a great opportunity and we made the acquisition. As we sit here and look at how we did the first year, I think it moved forward extremely well. Another thing that we have to remember is that at the time Gexpro was a company owned by a manufacturer and much of what they did related to GE. So we’ve opened the door, which allows them to look at other arenas and other areas. They have certainly moved forward in operating profitability.
Q: When you say you have opened the door and allowed them to look at other areas, can you expand?
They’ve become more of an electrical distributor and less of an opportunity for a manufacturer to move their product.
Q: What is the schedule for completing the integration of Gexpro?
The integration will be completed for the most part in 2008. We’re well along and a lot of it has been done, but there is some timing issues related to the contractual agreement that will run into 2009.
Q: You will be NAED chair in 2008-09. How will you juggle these responsibilities with an already demanding job?
As we continue with this restructuring and the integration, we’re reorganizing some of the activity and spreading the workload. I don’t foresee having an issue when I take over in May, as my workload will be diminished. I wouldn’t take on such a responsibility with NAED if I felt I wouldn’t have the proper amount of time to devote to the association.