Marshall to form alliance with Sonepar

Electronic News, March 14, 1994

EL MONTE, CALIF.--Marshall Industries and Sonepar Electronique International (SEI) of France agreed in principle to form a strategic business alliance, providing marketing and operational resources and customer support to one another.

"The joint resources of Marshall Industries and SEI will provide the framework for delivery of quality service to customers and suppliers throughout North America and Europe," said Robert Rodin, president of Marshall Industries. Marshall is slated to eventually gain a minority stake in Sonepar's electronic distribution operations under the agreement.

The proposed deal is the latest in a string of distribution industry consolidations, partnerships and globalization efforts among leading companies.

Initially, Marshall will invest $151 million French francs (approximately $26 million in U.S. dollars at last Tuesday's exchange rate) represented by a guaranteed, interest-bearing convertivle note. SEI plans to use the proceeds for business expansion purposes.

It is anticipated that the note will be converted in 1997 into a minority equity interest of up to 20 percent in the operations of SEI. Following the conversion, SEI will be granted an option to purchase an equivalent amount in U.S. dollars in Marshall's stock of up to 5 percent of Marshall's outstanding shares on a fully diluted basis. In addition, Marshall will have the option of increasing its equity investment up to 49 percent in SEI's European electronic component distribution business.

During the period of its investment, Marshall will have two representatives on the board of directors of SEI, and SEI will have two representatives on the board of directors of Marshall. The transaction is subject to approval of definitive agreements by the boards of directors of Marshall and SEI.

Marshall Industries and SEI are among leading distributors in sales volume in the U.S. and Europe, respectively. SEI projects that its electronic distribution sales for 1994 will be in excess of $2.5 billion French francs (approximately $428 million in U.S. dollars using Tuesday's exchange rate).

SEI is a privately held company whose principal shareholders are involved in other distribution business. Marshall will have no interest in the non-electronic distribution activities of SEI.

Meanwhile, Marshall last week reported operating results for its third fiscal quarter ended Feb. 28, 1994. Net sales for 3Q94 were up 27 percent to $197.6 million, compared with $156.2 million for the same period a year ago. Net income for 3Q of this fiscal year grew 66 percent to $7.8 million, or 45 cents per share, from $4.7 million, or 27 cents per share, for the prior year.

For the nine-month period of fiscal 1994, net sales grew 29 percent to $598 million, compared with last year's $462.8 million. Net income to date was up 43 percent to $23.9 million, or $1.38 per share, compared with $16.7 million, or 97 cents per share. All per-share amounts have been adjusted to reflect the two for-one stock split paid on Feb. 28, 1994

Management cited continuing strong market demand for components, particularly semiconductors, for the sales increases.