Anixter to acquire Tri-Ed for $420 million

GLENVIEW, Ill.—Today, Anixter International announced that it will acquire Tri-Ed for $420 million, so now Tri-Ed, which had aspirations to become a "billion dollar distribution business," will be part of a $1.7 billion security distribution company.

Anixiter will buy Tri-Ed from Audax Group, a private equity firm, which acquired Tri-Ed in April 2012.

Since getting into security in 2000, Anixter has “quietly built a $1.1 billion security business, but we're still the guy people don't think about for security. We think [this acquisition] will help us advance our position,” Bob Eck, Anixter president and CEO, told Security Systems News.

Eck said growing Anixter's security business is a strategic priority for the company.

The deal, which is subject to government approvals, is expected to close by Sept. 30 and to be accretive to EPS in the first full year of operation.

Tri-Ed had $570 million in revenues and $36 million in EBITDA for the trailing 12 months ending June 30.

Eck called the deal “a compelling opportunity” that brings Anixter complementary products and capabilities including a major branch network (61 offices and two technical sales centers in North America) where it can offer its IP-based products and cabling products; access to 20,000 small and mid-sized dealers who provide an entree into the residential and small commercial market sector for Anixter; and a product portfolio that includes intrusion detection and fire/life safety that Anixter has not offered previously and more access control and video surveillance products than it currently offers.

How will this deal affect current Tri-Ed dealers?

“On day 1, nothing will change,” Eck said. “Tri-Ed dealers will still be calling the same branch offices and talking to the same sales people. Over time we will have … a broader product offering for Tri-Ed and Anixter dealers."

Eck said Tri-Ed dealers will have access to Anixter's “Infrastructure Solutions Lab … that offers quality control testing and proof of concept testing—something that's important in the security space.” Security Systems News visited the lab in 2007.

Tri-Ed dealers will also have access to Anixter's global footprint, Eck said. Anixter can help Tri-Ed dealers service their customers who have offices outside of the U.S. “on time, on budget, [working with our] quality network of dealers we know around the world.”

Tri-Ed has been acquisitive under the ownership of Audax. Will that continue? Eck said yes.

“We want to continue to pursue acquisitions and … greenfield expansions. We want to keep Tri-Ed's growth rate running.”

Tri-Ed has had an organic CAGR of about 9 percent over the past several years, while Anixter's security division in North America in the past year has been fairly flat.

Asked what role Tri-Ed CEO Pat Comunale will play in the new combined entity, Eck said “we can't do integration or provide a road map until we receive antitrust approval.”

“What I can say is that we've met Pat and some of his senior leadership team and they are incredibly talented people and we're very excited to have them as part of the Anixter family,” Eck said.


Will the new Anixter emerge as a serious competitor to distribution giant ADI?

Eck said ADI is a serious competitor that does a very good job. Anixter's decision to acquire Tri-Ed  “has nothing to do with ADI and everything to do with Anixter building a more successful and vibrant security operation,” he said.
 
Imperial Capital was one of the advisors to Tri-Ed on the deal.
 
Typically, private equity looks to exit after three to five years. Audax is exiting after less than two-and-one-half years. Asked why, Imperial Capital EVP and managing director John Mack said the sale “may be a little on the early side, but it's not unusual.” He added that sellers “look at the market opportunistically. … Sometimes circumstances materialize sooner than expected."
 
The combination of very good debt markets coupled with strong acquisition interest from private equity groups and focus from strategic acquirers in Tri-Ed presented an opportunity for Audax, Mack said.
 
He pointed out that Tri-Ed made a number of acquisitions and also grew organically in the past couple of years. “Audax committed itself fairly seriously [to investing in Tri-Ed's growth], and it got nicely rewarded for that,” Mack said.