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Dell backs USESI
Dell Backs Industry’s Newest Acquirer, May 16, 2006
 (From TED Magazine)
With last week’s announcement of its acquisition of Electrical Wholesalers, Inc. (Hartford, Conn.), U.S. Electrical Services Inc. makes its debut on the electrical distribution scene. Richard Worthy, who headed the effort of Sonepar U.S. to create a national company from scratch via acquisition, is chairman/CEO of USESI.
In an interview with TEDMAG, Worthy revealed that his company has two financial backers: - Kelso & Co (New York City);
- MSD
Here’s the huge kicker: MSD stands for Michael & Susan Dell. Michael Dell is the founder (from his college dorm room) of the eponymous computer company. See www.msdcapital.com/what.html. According to the site, MSD Capital is an investment firm “formed in 1998 to exclusively manage the capital of Michael Dell and his family.”
Michael Dell’s net worth, according to Forbes magazine, is in the vicinity of $18 billion. He’s ranked #4 on the magazine’s list of the 400 richest Americans – after Bill Gates, Warren Buffet, and Paul Allen (like Gates, of Microsoft fame).
Kelso & Co. (see http://www.kelso.com/) is a private equity firm (with $2.4B of equity). Worthy said Kelso as a history of taking long-term positions before taking companies public.” What’s long-term? Most private equity firms have a 1-3 year horizon; according to Worthy, Kelso – and MSD – have 6-10 year horizons.
An example: Kelso owned Jorgenson Steel ($1.6B in revenues) – one of North America’s largest steel distributors – for more than 14 years before taking it public. Kelso also is involved in American Standard, the large plumbing concern, as well as numerous other basic industry corporations.
USESI will make more acquisitions in the next year, Worthy told TED, growing perhaps to $500M in annual sales. Ultimately (within five years), he expects USESI to grow as large as $2B in annual sales. Is USESI a distributor “roll-up?” Worthy said he prefers the term “build-up” – and also noted that Kelso has financed “numerous build-ups” in its history.
What does this mean for the electrical distribution industry?A brand new potential acquirer has come on the scene. How much money does USESI have to invest in acquisitions? “We currently have the ability to deploy a minimum of $230 million of equity (not including debt), but given the resources of KELSO and MSD, they are willing to triple that amount of equity if a compelling opportunity were to arise,” Worthy stated.
About Electrical Wholesalers: Founded in 1920 by Hyman Namerow in East Hartford, Conn., the company has 175 sales representatives, 10 product specialists, and roughly 200 additional employees. With a 150,000 sq. ft. distribution center, the company claims (on its Web site, http://www.ew-inc.com/) to have $18M in inventory. All 22 of Electrical Wholesalers’ branches are located in Connecticut. Arthur Namerow (64) and Robert Namerow (60), who are brothers, hired HT Capital (an investment banker) to help them sell the company. According to Worthy, the Connecticut company’s sales are roughly $160 million.
Additionally, the Namerows will remain with the operation, according to Worthy, and will continue to run the company.
Worthy indicated that USESI’s staffing and operational philosophy would consist of a very small HQ staff with the vast majority of personnel located in the field as close to the customer as possible. “My experience at GE taught me that electrical distributors optimize the customer value proposition, employee satisfaction and vendor interaction with a regional approach, we will continue in the same vein at USESI,” he said.
Individuals seeking to learn more about USESI can e-mail Worthy at info@usesi.com.
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