Lawson Products to merge with TestEquity and Gexpro Services
Lawson Products and LKCM Headwater Investments have agreed to merge Lawson with two of LKCM Headwater’s portfolio companies, TestEquity and Gexpro Services.
TestEquity is a California-based distributor focused on providing test and measurement equipment and solutions, electronic production supplies, and tool kits from manufacturer partners supporting the technology, aerospace, defense, automotive, electronics, education, and medical industries.
Gexpro Services, based in Irving, Texas, is a global supply chain solutions provider, specializing in the development of mission critical production line management, aftermarket and field installation programs.
The affiliates of LKCM Headwater that currently own TestEquity and Gexpro Services will receive Lawson common stock as consideration for the transactions. The three niche industrial distribution companies will be brought under a holding company with all three companies operating independently with their existing management teams as separate divisions.
The combined companies will have an estimated pro forma annual revenue of more than $1 billion and combined estimated pro forma annual adjusted EBITDA of more than $100 million.
The holding company structure is expected to enable Lawson, TestEquity and Gexpro Services to maintain their respective high-touch, technical, value-added service delivery models and customer relationships within their specialty distribution businesses under the leadership of their separate business unit management teams with continued oversight from Lawson’s board of directors.
Lawson currently services approximately 90,000 customers, while TestEquity and Gexpro Services provide support to over 30,000 and over 1,800 customers, respectively.
Upon closing of the combination, Lawson’s capitalization is expected to consist of approximately 19.4 million shares, of which approximately 47 percent would be held by existing Lawson shareholders, and 17 percent would be held by the existing owners of TestEquity, and 36 percent, would be held by the existing owners of Gexpro Services.
Affiliates of LKCM Headwater currently beneficially own approximately 48 percent of Lawson’s outstanding shares.
“Through the combination of these three complementary valued-added distribution businesses, we strongly believe the holding company will be well-positioned to leverage its combined leadership, strong balance sheet and stable cash flow generation to drive more transformational value creation for shareholders,” said J. Bryan King, chairman of the board of directors of Lawson and managing partner of LKCM Headwater.
"As the CEO and a fellow shareholder of Lawson, I am excited to be moving forward with the LKCM Headwater team to have an aligned vision and mission of creating a best-in-class specialty distribution holding company. This combination transforms each of our highly complementary businesses, creates a greater level of scale, enables accelerated growth, and expands our competitive advantage,” said Michael DeCata, president and chief executive officer of Lawson
Upon completion of the merger, DeCata will assume the position of chief executive officer and Ron Knutson will become chief financial officer of the holding company in addition to their responsibilities at Lawson’s existing operating company.
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