WinWholesale, ranked #3 in this year's Premier 150 list of the nation's largest PHCP distributors, announced on April 12 that it has signed an agreement of merger with Noland Co., ranked #12 on our Premier 150 list.
Under the terms of the agreement, which was unanimously approved by both companies' boards of directors and by a special committee of the board of directors of Noland Co., WinWholesale will pay $74.00 in cash for each Noland share. Based on shares outstanding, this would put the value of the deal at around $250 million. The purchase price represents a 52% premium over the $48.58 Noland's stock closed at on the day before the announcement. The stock had been trading between $41 and $52 for the past year.
The acquisition, which is subject to certain conditions, is anticipated to close by the middle of May. Shortly after the transaction closes, WinWholesale will take Noland Co. private and it will be delisted from the NASDAQ. WinWholesale expects combined 2005 revenues of the two companies will exceed $2 billion.
Noland's revenues in 2004 were $548.1 million. The company operates 101 facilities in 13 states spanning the southeastern quadrant of the country. The deal also would include Noland Properties, the company's property-management subsidiary that owns or leases many of the Noland facilities. Noland is headquartered in Newport News, Va., WinWholesale in Dayton, Ohio.
Rick Schwartz, president and CEO of WinWholesale, stated: “We have been looking for a partner whose geographic reach complements WinWholesale's existing local companies. We believe that WinWholesale's and Noland's customers will benefit from our collective 5,100 employees, 530 locations in 43 states and more than $300 million of inventory ready to serve their needs. We are confident that combining the WinWholesale and Noland organizations will spur further growth and profit opportunities throughout the distribution chain.”
Lloyd Noland III, president and chairman of Noland Co., said: “Together, Noland Company and WinWholesale represent 140 years of providing outstanding industrial wholesaling services throughout the United States. We are pleased to entrust Noland Company's future into the hands of WinWholesale, a
company that has demonstrated its ability to grow revenues and profits and to provide opportunities to its employees as well as value to its customers.”
Reasons For Selling
Noland also commented on his motivations for selling as follows: “In order to obtain the critical mass required to be a long-term player in this industry, we would have to recapitalize the company to fund accelerated growth - growth that would be a multi-year process. At my age (61), I wasn't willing to tackle it. In addition, the time and expense associated with complying with Sarbanes-Oxley was pushing us to consider either going private or selling. Since our most attractive alternative was to find a merger partner, I am delighted that WinWholesale has made us an attractive offer."The transaction will be structured as a tender offer for Noland shares. The agreement provides for a wholly-owned subsidiary of WinWholesale to offer to acquire all of the outstanding shares of Noland common stock at $74.00 per share in cash. The tender offer will be subject to at least two-thirds of the outstanding Noland Company shares, on a fully diluted basis, being validly tendered and not withdrawn. Each of the Noland Co. board of directors and the special committee of the Noland Co. board of directors unanimously approved the offer and recommended shareholder acceptance. About 62% of the company's stock is owned by the Noland family.
The tender offer will be subject to regulatory approvals and other customary conditions. Following the close of the tender, any shares not tendered will be acquired at $74.00 per share in cash in a subsequent merger. Subsequent to the merger, Noland will operate as a private wholly-owned subsidiary of WinWholesale. William Blair & Co., LLC. acted as financial advisor to WinWholesale. The Blackstone Group L.P. served as financial advisor to Noland.
In explaining the deal to its own employees, WinWholesale executives indicated the acquired company would continue to operate under the Noland name and from its current headquarters for the foreseeable future. They explained that the minimal overlap of Noland's locations were a prime attraction to them. Another was that, like WinWholesale, Noland operates on an IBM hardware platform and custom software, which should simplify integration.
Early indications were that WinWholesale had no plans to sell any of Noland's existing locations or to eliminate any jobs. It was undetermined at press time whether Lloyd Noland III or other top Noland executives would continue an active management role, although WinWholesale's position was stated as, “we hope so.”
In one of the better guarded secrets of this notoriously loquacious industry, Noland and WinWholesale had been in discussions since early January. WinWholesale reportedly was one of six suitors interested in buying Noland.
In explaining the deal to associates, WinWholesale's management explained the large purchase price as “within a range which we could make this work.”
Noland/WinWholesale Backgrounds
Noland Co. traces its history to 1915, when L. U. “Casey” Noland started a mechanical contracting business. In 1919, he formed Newport Plumbing & Mill Supply Co. in his hometown of Newport News as a way to cope with material shortages born of World War I. The firm has been known as Noland Co. since 1922, and was headed by Casey Noland until his death in 1952.He was succeeded by his son, Lloyd Noland Jr., who took the company public in 1967. Lloyd Noland Jr. retired as chairman and CEO in 1987, and was succeeded by his son, Lloyd Noland III, who has headed the company ever since.
WinWholesale, last year's SUPPLY HOUSE TIMES' Wholesaler of the Year, evolved from the former N.O. Nelson Co. plumbing wholesale chain that had been part of the industry since the 19th century. WinWholesale operates more than 400 local wholesale companies in 41 states, primarily in the Northeast, Midwest and West. It is one of the nation's largest PHCP wholesale distributors, with 2004 revenues of approximately $1.4 billion.
WinWholesale's unique business model emphasizes a combination of local ownership and decision making supported by centralized technical and administrative services. - Jim Olsztynski
