Borders Reaches the Atlantic

The recent Border States acquisition of Shealy Electrical Wholesalers surprised many while enabling Border States to now spread its reach to the Atlantic Ocean.

The estimated $2 billion distributor now reaches 18 states, touch three border and employ 2200 people at 97 locations.

Some observations …

• In a November 2012 article, Tammy Miller, CEO of Border States expressed that there 2017 goal was to be a $2 billion company. Reportedly this “will help us accomplish our strategic goals,” which is pretty impressive considering the challenging marketplace in the Dakotas and some of Borders’ other areas due to the oil / gas slowdown and the local economy ripple effects of the slowdown.
• Border States, which is an ESOP, appears to be a preferred haven for ESOP-oriented companies as evidenced by Western Extralite selling to Border States in fall 2014 and now Shealy favoring this form of ownership.  Given the size and quality of Shealy, it must be presumed that other traditional acquirers also looked at them and they chose an ESOP culture.
  • And this is an interesting, perhaps validating, comment in their press release by Bill DeLoache, CEO of Shealy, ““We spent a lot of time looking at different leadership and ownership transition options, keeping in mind what would be best for our customers, employees and supplier partners,” said Bill DeLoache, Shealy CEO. “After much consideration, we concluded that an employee stock ownership plan (ESOP) best met these objectives. Border States is a great distributor and an established, top-performing ESOP company.”
• Many were surprised Shealy sold as some expected them to be an acquirer.  Perhaps now they just have a different “bank” and Border will use Shealy as a platform to either move north into Virginia and Maryland or aim its focus south and compete more directly with Mayer (which recently made a switchgear line change).
• David White, who was president of Shealy, will know become a regional vice president for Border States.  It should also be noted that Border had acquired Harris Electric, which is based in east / central Tennessee a few years back.  This could enable Border to expand Shealy’s new “Strategic Solutions” services group.
• Moving into South Carolina potentially represents significant opportunities for Border States:
  • Savannah has been expanding its port due to the widening of the Panama Canal and expectations of larger ships coming into the port.
  • Boeing has been expanding its facilities in South Carolina
  • As a right to work state, more manufacturers seem to be moving into North Carolina and South Carolina
  • There is automotive manufacturing in South Carolina
  • CSX is seeking to put a major terminal into eastern North Carolina
  • Financial services, tech, pharma and bio-tech continue to move into the North Carolina market
  • and both state economies seem to be in good share … plus the residential markets are good (retirees / people moving for more temperate weather).

So timing could be good, and they are both AD members so can assume they knew each other very well.

And in this article from 2012, Tammy emphasizes the ESOP returns that the company has earned …-7% in 2009 (when the market was down over 30%), to 19% and then 32% … in 2012 and the article mentions that 150 employees, at that time, had retired as millionaires!  A powerful retention incentive and potential a great sales tool to owners … you become a multi-multi-millionaire and your people have the potential to be very well cared for.  Perhaps that is the ultimate definition of loyalty from an owner to his employees when an exit strategy is desired.

Congrats to Border States.  The East Coast, and more specifically the Southeast, has another major player who is in it for the long haul.  This “ups the ante” for many competitors as Border can bring additional resources and best practices to Shealy.