Global Fastener News

Anixter Acquires Distribution Dynamics in 2004
From Richard P. Hagan’s List of Top Fastener Acquisitions for 2004

May 10, 2005 FIN – In June Anixter International Inc. (NYSE: AXE) purchased Distribution Dynamics Inc. for $32.8 million in cash.
Eden Prairie, MN-based Distribution Dynamics distributes fasteners and assembly hardware to OEMs. The company generated sales of $76 million in 2003, operates from 16 U.S. locations and employs about 240 people.
Distribution Dynamics had been operating under Chapter 11 bankruptcy protection since April 2004 and was sold in an auction conducted by the U.S. Bankruptcy Court in Minnesota.
DDI signed an agreement to be acquired by Anixter for $25 million three days prior to its bankruptcy filing, but the auction process drew competing offers from Fastenal Co. Anixter ultimately agreed to pay the 31% higher purchase price.
Following the transaction closing, DDI was merged with the other fastener distribution operations of Anixter Pentacon (acquired in September 2002) and Walters Hexagon (acquired in September 2003) and the combined operations were renamed Anixter Fasteners.  ©2005/2010 Fastener Industry News

1998 FIN – Distribution Dynamics Emerges From Quietly Building a Corporation

June 8, 1998 FIN – They spent two years acquiring fastener distributorships as quietly as they could.
The businesses, some of which started in garages, together now add up to a significant corporation, and today Distribution Dynamics Inc. leaders are proudly talking about what they’ve done and where they are going.
CEO Larry Del Santo said last year that Distribution Dynamics sales exceeded $100 million.
DDI totals more than 500 employees at 30 locations from North Carolina to California.
“I’m proud of what we’re putting together,” Del Santo declared. “You don’t do that by telling people. You do that by showing people.”

Their acquisitions include Century Fasteners of Los Angeles; C-Tech Systems of Minneapolis; Rainbow Fasteners of Houston; Beaver Bolt of Portland, OR; Northwestern Industrial of Milwaukee; and the Fresno, CA branch of Allied Bolt.
Their horizons extend even further. DDI executives aim at serving customers around the world. Current major customers include Harley Davidson, Winnebago, Polaris, Cummins, Applied Materials, and Toro.
More acquisitions and major OEM customers are anticipated across the globe
“We will go wherever there is customer interest,” Del Santo said.
Walnut Creek, Ca based Distribution Dynamics created a lot of interest when Del Santo and executive vice president Brian Kerester participated in a panel discussion on consolidation at the Western Association of Fastener Distributors spring meeting. The industry had been hearing of the acquisitions, but this was the executives’ first formal introduction to the industry.
In an interview with FIN, Del Santo said the consolidation movement will mean the industry will be seeing more of DDI. “We didn’t create the market environment,” Del Santo said. He knows the situation from his more than 20 years of experience in the office products and specialty foods industries.
Why fasteners? “There is a special dynamic in the fastener industry today” Del Santo explained. “The fastener industry is so fragmented,” he said of the thousands of North American distributorships.
Del Santo compared today’s fastener industry with the office products industry of the early 1980’s when there were 1.300 suppliers. “It was perceived there was no entry barrier. Today there are barriers- technology, capital, people.”
Now the number of major office products suppliers in the U.S. has shrunk to five.
Consolidation of the $9 billion fastener industry “is going to happen,” Del Santo assured doubters. “It is going to happen faster that in the office products industry.”
Kerster said Distribution Dynamics and other consolidation companies are “driven by customers.”
Customers are now competing worldwide in a deflationary economy, Kerster explained. “Everyone wants more for less. People can choose to ignore it or benefit from it.”
Independent distributors should take a look at how they can compete in the future, Del Santo advised. “There may not be as many options tomorrow,” he added.
There are distributors who believe consolidation won’t happen or won’t happen fast as predicted and there “are those actively seeking to take advantage of it,” Del Santo said.

Who Should Apply
DDI is actively seeking to acquire profitable distributors who are strategically focused on the OEM customer and who want to take them to the next level by joining DDI,” said Kerester, who has handled acquisitions in several industries.
Distributor Dynamics offers distributors advantages. “The way business is done is different,” Kerester said of consolidation. “We give resources back to the field,” allowing the distributor to expand and offer new services to customers.
Kerester, who is in charge of acquisitions for DDI, invited distributors thinking of selling to visit the DDI Bay Area corporate office. “They can get a sense of an organization by walking around,” he said. “I think they will be impressed with our depth and breadth.”
He cited the major OEM customer and “our nice mix of skills in product knowledge, customer service, finance and wholesale distribution” as key reasons to join DDI.
Distribution Dynamics is not looking for retirees or turnaround situations. The management team must be ready to work.
Employees will like Distribution Dynamics because of “our deep set of values and our constantly trying to make it a better opportunity to work and advance,” Kerester said.

The Future
OEM’s are DDI’s future, the executives say. “We are not going to stray into retail or MRO,” Kerester said. “The focus is on OEMs”
Growth will come through “partnering with the right folks,” both in acquiring distributors and in working with customers,” Kerester said.
Del Santo says his work has only begun. “The next five years will be intense competition and infrastructure building,” he predicted.  ©1998/2010 Fastener Industry News
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2002 to 2005 FIN ? Distribution Dynamics
2002 FIN – Distribution Dynamics Completes Refinancing
June 20, 2002 FIN – Distribution Dynamics, Inc. recently completed its bank refinancing, converting the company’s approximately $115 million of bank and institutional debt to $28 million of secured debt, with approximately $87 million of debt extinguished.
The company’s senior lenders have extended a new $9 million revolving credit facility to the company as part of a three-year commitment.
Andrew G. Barnett, CEO, said “Our banks have provided consistent and extraordinary support from the beginning, not only as evidenced by their willingness to retire a substantial amount of debt but by investing a fresh $9 million in the form of a new revolving credit agreement.” Web: distributiondynamics.com ©2002/2012 Fastener Industry News

2003 FIN – Distribution Dynamics Names Polimeni CEO

October 1, 2003 FIN – Distribution Dynamics Inc. appointed Dominic Polimeni president and CEO. Previously Polimeni was chairman and CEO of Questron Technology Inc.
Polimeni also was the CFO for Arrow Electronics and a partner in the New York office of Arthur Young & Co. (now Ernst & Young). He is a member of the Nu Horizons Electronics Corp. board of directors.
Both Questron and DDI acquired fastener distributorships in the late 1990s.
Publicly held Questron went into bankruptcy and was acquired by the GE Supply division of General Electric in 2002.
“I am proud to be presented with the opportunity to lead DDI and look forward to bringing the business and its associates to clear and increasing opportunity,” Polimeni said. “I firmly believe that DDI is ripe with the ingredients for success, with its loyal long-standing customers, superior suppliers, supportive investors, and, most of all, its dedicated and talented team of associates.” Eden Prairie, MN-based DDI is a value-added distributor of fasteners, hardware and related products specializing in inventory logistics management for OEMs. E-mail: info@distributiondynamics.com Web: distributiondynamics.com ©2003/2012 Fastener Industry News

2004 FIN – Anixter Pentacon to Acquire Distribution Dynamics

April 26, 2004 FIN – Distribution Dynamics Inc., a privately held distributor of fasteners and small components to OEMs announced will sell its assets and operations to Anixter International Inc. for $25 million.
The proposed sale is subject to approval by the U.S. Bankruptcy Court for the District of Minnesota where DDI filed Chapter 11 petition. The proposed sale is subject to higher offers and approval by the Bankruptcy Court, and is expected to close in late June. Anixter entered the fastener distribution business by acquiring Pentacon Inc. out of bankruptcy in 2002.
In connection with this proposed purchase, Anixter plans to assume certain obligations of DDI under the facility and operating leases that are used in conjunction with the operations that Anixter is proposing to purchase and Anixter plans to make offers of employment to the employees in such operations.
Commenting on the Chapter 11 bankruptcy filing and the proposed acquisition, DDIs CEO Dominic Polimeni told Fastener Industry News that the “financial challenges of the past few years have accumulated to the point where it is now in the best interest of our customers, employees and suppliers to seek a fresh start.”
Polimeni described Anixter as “a strong company that has all the resources, both financially and operationally, to ensure the continued quality service and uninterrupted supply of product to our customers and excellent career opportunities for our employees.”
“Anixter’s willingness to purchase certain claims at a level in excess of what is likely to be recovered from the bankruptcy process is an excellent opportunity for key product suppliers to minimize their financial losses in this situation, commented Polimeni.
Anixter CEO Robert Grubbs pointed out that prior to the pending DDI acquisition “we generated approximately $300 million in sales per year from the sale of fasteners and other small components to OEMs in the US and United Kingdom. We believe the acquisition of the operations…”  ©2004/2012 Fastener Industry News

2004 FIN –  Anixter Outbids Fastenal for DDI

June 21, 2004 FIN – Anixter International won the court auction for Distribution Dynamics Inc. with an offer of $32.8 million, outbidding rival Fastenal Corp. for the Eden Prairie, MN-based fastener supplier.
The June 18 auction went seven rounds before Anixter clinched the acquisition.
Fastenal’s bidding boosted Anixter’s initial offer of $25 million by more than 30%.
The deal could still leave DDI suppliers without compensation. Several prominent fastener suppliers, including Textron Fastening Systems and Porteous Fastener Co., are collectively owned millions by DDI.
Anixter’s acquisition includes of all DDI assets at 17 locations in the U.S., Canada and Mexico.
The DDI sale to Anixter did not include two plants in Portland, OR, which were purchased by Fastenal for a reported $1.1 million in a separate auction. Fastenal outbid Portland-based RBJ Fasteners and Hodell-Natco Industries Inc.
Court documents indicate DDI CEO Dominic Polimeni and CFO Michael Wise stand to walk away from the company with substantial bonuses. DDI earmarked more than $2.2 million for Polimeni and 11 other “key” employees. Polimeni is scheduled to receive $1.4 million and Wise is slated to gain $292,500, on top of their current unspecified compensation packages. In addition, Polimeni and other DDI executives will receive 4.2% of any proceeding in excess of the original $25 million bid, sweetening the bonus deal by more than $350,000.
DDI reported sales of $76 million during fiscal 2003 and has 227 employees. Anixter promised to extend employment offers to all DDI workers. Web: anixter.com ©2004/2012 Fastener Industry News.

2004 FIN – Letham:  Anixter Had No Role in Polimeni Bonus

July 1, 2004 FIN – Anixter International had no part in negotiations for the $1.4 million-plus bonus for Distribution Dynamics Inc CEO Dominic Polimeni, Anixter CFO Dennis Letham announced.
“Anixter entered into a contract to acquire most of the assets of DDI,” Letham explained. “Whatever contracts there were between Polimeni and DDI were done by the DDI board. Anixter never controlled the legal entity of DDI.”
Polimeni and 11 other top employees received bonuses from the sale of DDI.
The company had filed for bankruptcy April 23, 2004, and the Anixter acquisition was sealed in an auction on June 18.
The DDI board consisted primarily of lenders to the fastener distributor.
Anixter entered the fastener business with the acquisition of Pentacon in 2002 and added UK-based Walters Hexagon in 2003. Web: Anixter.com ©2004/2012 Fastener Industry News

2004 FIN – Grubbs: Anixter Limited in Repaying DDI Suppliers

July 2, 2004 FIN – Following a bidding war with Fastenal Co. to acquire bankrupt Distribution Dynamics Inc., Anixter Inc. CEO Robert Grubbs notified suppliers about the good and bad news of the acquisition.
In a June 22 letter, Grubbs pointed to Anixter’s overall financial stability as the “good news about the DDI deal.”
“It is important that we both turn to the future and work on building a lasting and healthy relationship,” Grubbs stated.
But he also stressed the importance of being “candid about what we each can and cannot do” in relation to the large debt many vendors are owed by DDI. Bankruptcy court records revealed that DDI owed suppliers at least $8.4 million. Those vendors are unlikely to be paid because Anixter was forced to pay as much as 30% more for DDI than originally offered.
In an earlier letter, dated April 26, Grubbs had told suppliers that Anixter would make offers to purchase “certain valid supplier claims for products delivered before DDI filed for bankruptcy.
But according to Grubbs, that scenario was complicated by the active bidding processthat drove DDI’s final price from $25 million to $32.8 million. Because Anixter’s eventual bid increased more than 30%, the company now has “very limited financial flexibility” in relation to debts held by suppliers, Grubbs explained. “As a result, while we may still make offers to purchase some such claims, the amount, if any, purchased will be substantially less than originally conceived,”Grubbs noted.
“It is important to recognize that one of the larger contributing factors to this situation … were the owners and managers [of DDI] who paid unrealistic prices for the businesses they acquired,” Grubbs wrote.
DDI has already asked for open credit terms from its vendors. Web: anixter.com ©2004/2012 Fastener Industry News

2005 FIN – DDI Suppliers Hit With Bill From Bankruptcy Court

June 28, 2005 FIN – Numerous fastener companies and other suppliers, which lost millions of dollars in the Distribution Dynamics Inc. bankruptcy, have received demands for payments they received in the 90 days prior to DDI filing bankruptcy in April 2004.
Attorney Laurie Jones of the Faegre & Benson law firm of Minneapolis offered to accept 85% on the dollar “in lieu of litigation.” Suppliers have until July 29 to send the money to James Potter as liquidating trustee of the DDI Liquidating Trust.
“Specifically, the debtors’ financial records indicate that you received the following transfer(s) from the debtors during the 90 days before the debtors filed their voluntary chapter 11 petitions on April 26, 2004,” Jones wrote to suppliers.
Jones wrote to suppliers that if they “dispute that the transfers are preferential,” according to the bankruptcy code they may provide an explanation and documentation.
“Please be advised that if the above-referenced claims are not resolved on or before July 29, 2005, the trustee will commence an adversary proceeding in the bankruptcy court to recover preferential payments,” Jones wrote.
One bankruptcy attorney not connected to the case confirmed to FIN that the court has strong powers to recover the payments plus interest.
Anixter International won control of the remnants of DDI for $32.8 million after a bidding war with Fastenal. ©2005/2012 Fastener Industry News.
For information on permission to reuse or reprint this article please e-mail: FIN@GlobalFastenerNews.com