Anixter to acquire Tri-Ed for $420M

Anixter has announced that it has entered into an agreement to acquire security products distributor Tri-Ed from Audax Group for $420 million. The deal is expected to close near the end of the third quarter and will be financed using available cash and borrowings under a new term loan that is expected to be entered into prior to closing, according to a statement issued by the company.  

Based in Woodbury, N.Y., Tri-Ed serves four major product segments of the security industry – video surveillance, access control, intrusion detection, and fire/life safety – and provides 110,000 products to a network of more than 20,000 dealers and integrators. The company employs more than 600 people across 63 locations in the U.S. and Canada. Tri-Ed generated $570 million in sales and $36 million in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) over the last 12 months ending June 30, 2014.

“As we talk about regularly in our earnings calls, growing our security platform both organically and inorganically has been a strategic priority for Anixter,” Bob Eck, Anixter’s president and CEO, said in a conference call discussing the acquisition on Monday. “Consequently, we are extremely excited to announce this transaction consistent with our long-held vision to create a leading global security distributor across video surveillance, access control, intrusion detection, and fire and life safety product categories.”

Eck said that the acquisition would broaden the product offerings available to Anixter customers in the aforementioned categories. Additionally, Eck said the deal will bring Anixter’s expertise in the area of IP video to Tri-Ed, whose business has focused on small and mid-sized systems integrators and customers, which also complement’s Anixter’s enterprise-focused business.

“In addition, Tri-Ed provides Anixter with exposure to the residential end market at an attractive time in the recovery cycle. With a large geographic footprint in North America, Tri-Ed’ value-added services approach and technical sales capabilities are consistent with Anixter’s customer-focused service model,” added Eck. “We believe this is a milestone transaction that will provide Anixter with access to new products, solutions, vendors, and customers - accelerate profitable growth for Anixter and create an even stronger platform for sustainable, long-term growth.”

Although Tri-Ed does have some expertise in IP video given its previous acquisition of Northern Video, Eck said that it is a small percentage of their overall business and they more heavily involved in the analog side of the market. “What we think is if you take our lab capability, our engineering capability with a pretty broad presence, frankly globally, and you add that into what Tri-Ed does today, you come up with this really interesting mix of a very strong IP capability along with a very strong analog capability and these other product segments which I think for the combined customer bases of the two organizations will be really compelling,” said Eck.

When it comes to the residential market, Eck said that Anixter isn’t changing its strategy to pursue the market, but rather the acquisition helps them get into it by providing them with a way tap into the integrator community that serves it.

“We have not been trying to avoid the market, we just simply haven’t had a good entree into it and Tri-Ed brings that,” said Eck. “And a critical piece, by the way, is that we entered the market with video surveillance, particularly IP-based video surveillance, as our entry into the market. We don’t have a strong presence in the intrusion and fire/life safety, which is a big part of the residential market, so what happens with this acquisition is that in the commercial space, we end up with a very compelling set of products and services across a broad customer base and then we end up entering the residential space… so it’s not so much targeting residential, but another subset of the integrator community.”    

While it has yet to be determined exactly how Tri-Ed will be integrated into Anixter’s operations, Pat Comunale, Tri-Ed’s president and CEO, said that the combined companies will boast quite a substantial footprint across the North American security industry once the deal closes.

“I think it is probably too soon to tell how the combination will look, but I can tell you the businesses are complementary and I think there is a nice overlap when the two business to come together. But again, right now, it is business as usual for the customers and vendors until the transaction closes sometime in September hopefully,” said Comunale in an interview with SIW. “When you look at the business today, Tri-Ed has 61 locations with five greenfields that will open in the September-October timeframe, as well as two technical support centers and this in conjunction to what Anixter has will make for a very good combination.”

Comunale also agreed that Anixter would really help bolster Tri-Ed’s position in the network video market.  

“Anixter is known as a leader in IP technology. Tri-Ed, up until 2010 when we acquired Northern Video, we were very much a traditional security distributor and by that I mean we sold a mix of both intrusion, fire, access control and cable,” said Comunale. “Northern Video actually had a fair amount of technical capability in the IP space. Anixter is really the leader in IP and you bring Tri-Ed into the fold, now you have a combined business that is let’s call it supercharged in IP, as well as a general line distributor servicing all aspects of the security space.”

When asked if Tri-Ed’s branch locations would be rebranded under the Anixter name, Comunale said that it is “too soon” to tell and that those announcements will more than likely come after the acquisition closes. Comunale added that he expects Anixter will not only continue the educational programs that Tri-Ed has established for its dealer and integrator customers, but will probably expand upon them.      

According to Ted Dosch, Anixter’s executive vice president of finance and CFO, this transaction is the largest in the company’s 57-year history and only the second acquisition ever in its’ $1 billion-plus security business.

“We have consistently emphasized that security is one of our key strategic growth initiatives and one our highest M&A priorities and this acquisition is a testament to our commitment to grow our security business,” said Dosch.