tried_featAnixter International Inc., Glenview, Ill., announced that it has entered into a definitive agreement to acquire Tri-Ed, Woodbury, N.Y., an independent distributor of security and low-voltage technology products, from Audax Group for a purchase price of $420 million. “Anixter paid a nice full price for what [is] for them a very strategic acquisition,” said John E. Mack, executive vice president, co-head of Investment Banking and Head of Mergers & Acquisitions at Imperial Capital, Los Angeles, who was a co-advisor on the deal. He added that Audax is exiting on the early side for typical private equity companies.

“They owned the business for just under three years, and a typical horizon for a private equity group considering an exit is three to five years, but there is a very good market right now for the sale of businesses, and this one has done very well between its organic growth and its acquisitions,” Mack commented.  The strong acquisition interest from private equity firms and a very good debt market came together to present a good deal to Audax, he added.

“Consistent with our stated priorities for capital allocation, the Tri-Ed acquisition accelerates the pace of growth in our security business, which is one of our strategic growth initiatives. We expect our strong cash flow generation will enable us to return to our target debt-to-capital range within 12 months, providing us with the continued financial flexibility that is a hallmark of our financial strategy,” Ted Dosch, Anixter’s executive vice president of finance and CFO, stated. Tri-Ed generated approximately $570 million in sales and $36 million in adjusted EBITDA over the trailing 12 months ending June 30, 2014.

Bob Eck, Anixter’s president and CEO, said that the acquisition will allow Anixter to reach approximately 20,000 small to mid-sized dealers in the residential and small commercial section of the market, something that was previously a “miss,” according to Eck. “We will now be able to reach 100 percent of the market.” Tri-Ed serves four major segments of the security business including video, access control, intrusion detection and fire/life safety, and provides approximately 110,000 products to more than 20,000 active dealer and integrator customers.

Eck continued, “The combination brings Anixter’s expertise in IP video surveillance to Tri-Ed’s customers. In addition, this transaction provides access to the residential construction end market at an attractive point in the recovery cycle as well as to a community of security integrators and dealers not currently serviced by Anixter. We look forward to having the Tri-Ed team join the Anixter family when the transaction closes.”

According to Tri-Ed President and CEO Pat Comunale, Anixter will keep Tri-Ed’s employees and offices open. “The acquisition was made for continued growth and expanding [the] footprint globally. I will have a leadership role in the Cabling and Security Solutions business that I am very much looking forward to. Very excited to be part of a world-class operation like Anixter and to continue building what was started in 2005,” Comunale shared.

One thing that is not certain – Tri-Ed pricing schedules in place with customers and the continuation of the Tri-Ed rewards program – as it was deemed “too premature” for information to be provided on these topics, according to inside sources.

The acquisition is expected to be accretive to earnings in the first full year of operation, exclusive of transaction and one-time integration expenses. The deal is set to close towards the end of the third quarter, pending U.S. government approvals.

The acquisition was financed using available cash and borrowings under a new term loan that is expected to be entered into prior to closing. The majority of transaction and integration costs will be incurred in fiscal years 2014 and 2015.  Greenhill & Co. served as financial advisor, Skadden Arps served as legal counsel, and KPMG served as accounting advisor to Anixter on the transaction.