Reps and distributors of wire and cable manufacturers Coleman Cable Inc., Waukegan, Ill., and Southwire Co., Carrollton, Ga., are sitting tight as they await the repercussions of the U.S. electrical market’s largest wire and cable merger in many years. The addition of Coleman significantly strengthens Southwire’s hand in several product categories, particularly in portable cord and low-voltage cable. For the rest of the distribution channel, the merger may have significant implications as domestic sources of several wire and cable product categories are concentrated in fewer hands.
Under terms of the deal, privately held wire giant Southwire will acquire publicly traded Coleman Cable in a cash deal valued at approximately $786 million, including the assumption of $294 million in net debt. Southwire’s tender offer, now underway and expiring at midnight Feb. 3, offers holders of outstanding Coleman shares $26.25 per share in cash. Coleman’s board unanimously approved the deal, which the companies expect to close by the end of the first quarter of 2014.
Until the merger is complete, Southwire and Coleman will continue to operate as separate companies. After the deal closes, Coleman’s management team will join Southwire. Southwire said it expects to maintain a significant presence in Waukegan.
Coleman Cable’s independent rep agencies received a letter this week from the company that said business will proceed as usual until the deal is final. Coleman reps told Electrical Marketing they’re preparing for interviews that will determine whether they will continue to have a role in selling the company’s products, as is typical for reps following a merger of competing lines. The decisions will be made on a market-by-market basis, and some agencies will be affected and others will not, the reps said.
Southwire informed its agents of the acquisition of Coleman Cable on a conference call the day that it was made public. Reps said they have been advised that more information will be forthcoming when the buyout is complete. Until then, no immediate changes have been made and business is proceeding as normal.
Bill Devereaux, principal of RB Sales Corp., Marion, Iowa, who reps Southwire to Iowa and Nebraska electrical distributors, said the deal will add to Southwire’s strength. “It will do great things for Southwire; we’re glad they did it,” he said. “This fills out their product offerings, and closes a gap on a big piece of the low voltage, coaxial and data-communications market they were going after. Coleman makes a great product and has a great reputation.”
One of the key product categories in play here is portable cord, where Coleman has been a market leader. One Coleman rep, who asked that he not be named because agency assignments have not yet been settled, said the merger is raising concerns among distributors about having limited choices, particularly if they want a domestic source of portable cord. He said Southwire’s sole-source distribution policies add a political dimension, making it difficult for distributors outside the sole-source franchise to compete. “Distributors who are not Southwire’s sole-source will avoid buying from them,” he said.
Another rep, Kevin O’Neill, principal of C&O Electric Sales Co., Overland Park, Kan., which handles Coleman and Encore Wire, among other brands, said the consolidation of U.S.-based wire and cable lines deserves a close look from authorities.
“A lot of people aren’t happy about this,” O’Neill said. “It gives the industry limited choices, and will have a negative impact on distribution’s ability to choose. I’m a conservative businessman and don’t like to see the government get involved in anybody’s business, but this is a case where there’s a definite reduction of competition.”
Coleman’s elastomer-based cord products, as well as low-voltage and control cables and brands such as Copperfield and Continental have given the company a strong position in markets where Southwire has been struggling to grow its share, such as OEM industrial, reps said. Southwire already is strong in the home center market, but the addition of Coleman’s products, particularly its Woods Industries brand, will give it greater coverage on retail shelves. Other Coleman brands include Royal, Baron, Seoprene, TRC, First Capitol and Watteredge.
“The combination of Southwire and Coleman will create one of the wire and cable industry’s preeminent companies with the ability to provide world-class service to its customers through a more robust and higher-quality offering of products and services, operational excellence and a stronger platform for enhanced product innovation,” said Stuart Thorn, president and CEO of Southwire. “Coleman’s exceptional engineering capabilities across multiple end markets and stellar reputation among customers make it an ideal fit with Southwire. Our shared focus on technology and innovation will allow us to better serve our respective customers, while also saving them time and money.”
Coleman reported revenues of $914.6 million in 2012. The Coleman deal would be the largest acquisition to date by Southwire, already one of the largest wire and cable producers in North America. Southwire bought the assets of American Insulated Wire, a major producer of portable cord products, from Leviton in 2010. Before that it was a frequent acquirer of other wire companies, including Alflex in 2004, FlatWire in 2005, Essex in 2006 and Maxis Contractor Equipment in 2009.
Since the AIW acquisition and the purchase of Tappan Wire & Cable later in 2010, Southwire has concentrated on organic growth through new product introductions such as its SimPull and CoilPak building wire products, as well as some bolder product-line additions such as its introduction last year of a complete assortment of Southwire-branded electricians’ hand tools and test equipment.