Rexel SA, which is privately owned by an investor group including Clayton, Dubilier & Rice, Eurazeo and Merrill Lynch Global Private Equity, will acquire GE Supply, the electrical services unit of General Electric, for $725 million (€567 million). The acquisition will double the size of Rexel’s presence in the US market.
The Paris-based company is the largest electrical supplies distributor in the world but it has only been one of several big players in the $64 billion US market for electrical components.
Shelton, Connecticut-based GE Supply had $2.2 billion in annual sales last year. Rexel’s US arm, Rexel Inc, posted annual sales of $2.5 billion. The two companies will now operate under a dual banner strategy, remaining separate entities for now while expanding their customer base and offering a wider array of products.
David Novak, a financial partner with CD&R, said Rexel Inc and GE Supply serve a different customer base but have similar infrastructures. He said Rexel Inc. is more focused on smaller projects while GE Supply is more focused on national accounts. The firm is the largest shareholder in the investor consortium, which acquired Rexel in 2005 for $3.7 billion.
Novak said CD&R sees the sector as very attractive because it is highly fragmented, especially in the US, which leaves much room for consolidation.
“It’s globally pretty fragmented,” he said. “It’s not often you can buy such a large business, at less than ten percent market share [globally], and have it still be number one. In the US over six percent would be number one.”
It was first reported that GE was looking to sell the unit in November. Since becoming chief executive of GE in 2001, Jeffrey Immelt has sold dozens of the company’s businesses, looking to focus on more profitable areas of the company. GE Supply was formed in 1929 and sells products from GE and other manufacturers to customers including commercial-building contractors.