Wired Up … 3 Make Financial Moves

Much news in the wire business today with Southwire, AIW, Encore and General Cable all making financial news … acquisitions and debt payoffs.

• Starting with the big announcement, as many know, Southwire acquired “certain assets” of AIW (okay, the assets that make AIW AIW!).  Good move for AIW, taking out a competitor.  While it will reduce competition, and some ability by distributors to shop projects, it will also help keep the wire business profitable.  Not many competitors left in the business (and perhaps this explains why IMARK decided to add Colonial Wire to its preferred manufacturer list after Colonial had been out of IMARK for a number of years).

Also a good move for Leviton as it enables them to retain focus on the core business, enables sales management not to be distracted by AIW and probably provides some additional capital that could allow Leviton to make other aquisitions in lighting controls or the datacom business.

And if you are an AIW employee, here’s a forum where some AIW employees were seeking answers about “next steps”.  Good luck to the plant employees and to the reps (whom we understand will be losing the AIW line very shortly).

• Encore paid off a $100M debt (in cash, not a refinancing) and now has “zero debt” according to Daniel Jones. Not too often a manufacturer has no debt. This can help them continue to weather the industry slowdown (after all, “cash is king”) or could enable them to seek other acquisitions in primary or ancillary industries (and we wonder if they were involved in discussions with AIW). With Southwire getting bigger, does Encore need to get bigger to compete more effectively and as a way to build its market share?
• General Cable also made the news, albeit for an international acquisition. General Cable acquired a majority stake in Phoenix Power Cables, a cable manufacturer in Durban, South Africa to better provide locally produced cable to utilities in South Africa.  While not relevant to the U.S. market, General Cable is an important player for many electrical distributors.

With wire companies making deals early in the year, what does this say about their forecasts for copper in 2010 and beyond? And is this the beginning of manufacturer acquisitions … the “haves” consolidating their product categories and possibly leaving the channel with less choice (or less brand-recognized choice)?