Franklin invests in distributors
Franklin Electric Co. is extending its reach by investing $89 million for controlling interests in three distributors, with plans to integrate them into the industry’s largest distribution entity.
Its larger entity would have 60 locations and nearly 500 employees.
The Fort Wayne-based maker of submersible pumps closed on those purchases with 2M Company Inc. of Billings, Mont., and Western Hydro Holding Corp. of Hayward, Calif. It expects to close with Drillers Service Inc. of Hickory, N.C., before the second quarter ends. The deals include assumed debt, and they include a 2M/DSI joint venture.
“The specialized groundwater distribution channel in the U.S., through which we sell our products is an important element in the ultimate sale, support and specification to the installing contractors,” Gregg Sengstack, Franklin’s chairman and CEO, said in a statement.
“Working in partnership with our distributors, Franklin Electric has developed a broad array of products and systems solutions that will only grow as regulatory and efficiency demands increase in North America. Franklin has worked closely with the management of 2M, DSI and Western Hydro for several years as well as the leadership of other strategic distribution partners, and the relationships have helped it develop appreciation for the value proposition of water systems distribution."
Through the purchases, Franklin is “forward integrating into this channel with four strong, customer focused organizations competing in the market, increasing our commitment to the entire channel and the installing contractor base,” he said.
The new distribution entity will be named Headwater Companies LLC and will be run by DeLancey Davis, a 25-year industry veteran who served as an executive officer at Franklin for the past 11 years.
“By forward integrating into distribution in the U.S., Franklin Electric is taking a logical next step in our evolution as a groundwater pumping systems company. This action places Franklin Electric shoulder to shoulder with the key decision makers in this end market — distributors and the installing contractors,” Sengstack said.
“The Headwater companies will continue to operate as full line wholesale distributors with a focus on total water systems support, including products from all industry manufacturers. Headwater will maintain a laser focus on supporting the professional installing contractor.”
Franklin expects its new business segment to have about $275 million in annual sales and to be neutral to the company’s 2017 adjusted earnings per share guidance of $1.77 to $1.87.