Why It Matters to Distributors :A potential take-private signals continued consolidation and suggests private ownership may accelerate long-term operational changes, acquisitions, and system integration without public market pressure.
LKCM Headwater Investments has made an offer to buy the rest of Distribution Solutions Group Inc. that it does not already own, in a move that would take the industrial distributor private.
The investment firm, which owns about 79% of the company, said in a 14 letter to the board that it is offering $29.50 per share in cash for the remaining stock. That is about 53% higher than the company’s closing price on March 13.
If completed, the deal would value Distribution Solutions Group at $2 billion.
LKCM Headwater said taking the company private would allow it to focus on long-term changes without the pressures that come with being publicly traded.
“As a private company, we believe the company would benefit from reduced management distraction and greater operational flexibility,” LKCM Headwater president J. Bryan King wrote in the letter.
The firm pointed to several areas it wants to address, including aligning multiple internal systems, improving sales and expansion strategies, and pursuing acquisitions. It said those efforts can be easier to carry out without the demands of quarterly earnings expectations.
LKCM Headwater said it expects to fund the deal with a mix of its own capital and borrowed money. It added that it does not expect financing to be a barrier to completing the transaction.
The firm said it could complete the deal within two to four months after reaching a final agreement.
Because LKCM Headwater is already the controlling shareholder, the proposal would need approval from a special committee of independent directors as well as a vote of shareholders not affiliated with the firm.
The company would also need to provide access to internal financial and operational information as part of the review process.
LKCM Headwater said its proposal is not binding and could be changed or withdrawn. It also said it is not seeking to sell its existing stake.
Distribution Solutions Group has not said how it plans to respond.
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