Category Archives: Distribution

Sysco hires new CFO from Hertz

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Sysco, the food distributor, has appointed Kenny Cheung as its new CFO. He joins from Hertz in Florida, where he was the CFO. Mr Cheung replaces Aaron Alt, who resigned in December to take the same position at Cardinal Health.



Neil Russell, the interim CFO, has been appointed Senior VP and Chief Administrative Officer, a newly-created role.

Mr. Cheung was promoted to CFO of Hertz in September 2020. In the month prior, two CFOs at Hertz resigned to take CFO roles elsewhere. Hertz went into Chapter 11 in May 2020, exited in June 2021 and completed an IPO in November 2021. Mr. Cheung joined Hertz in 2018 as Senior VP of Global Financial Planning and Analysis.

Prior to that he spent over 11 years at Nielsen Holdings, including five years in China. He started his career at GE.

Mr. Cheung will receive a base salary of $765,000 and a sign-on cash bonus of $600,000. He will also receive an equity award worth almost $2.5 million.

SEC filing – Sysco Cheung CFO

Sysco CFO resigns to take the same role at Cardinal Health

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Aaron Alt, the CFO of Sysco, the food distributor, has resigned to become the CFO of Cardinal Health, based in Dublin, Ohio.

Mr. Alt had been the CFO at Sysco (market cap $40 billion) for just over two years. Prior to that, he was CFO at Dallas-based Sally Beauty Holdings and also worked for Target and Sara Lee Corporation. He holds an M.B.A. from J.L. Kellogg School of Management at Northwestern University.



At Cardinal (market cap $20 billion), Mr Alt will receive a base salary of $825,000. That’s a small increase on his base at Sysco ($791,000). He will also receive a cash sign-on bonus of $1 million and a lump sum payment of $250,000 for his intended relocation. Mr. Alt will also be eligible for annual long-term stock incentives with a target value of $3.5 million. That’s about a $1 million higher than his annual target at Sysco.

In August, the Cardinal CEO Mike Kaufmann resigned, to be replaced by CFO Jason Hollar. The following week, activist shareholder Elliott Management took a large stake in the business. Cardinal has sinced agreed to appoint an Elliott representative to the board and appoint four other new independent directors.

Cardinal has under-performed its competitors in the past few years and, according to the Wall Street Journal, Elliott will likely push for the sale of the medical supplies business.

Sysco appointed Neil Russell, Senior VP of Corporate Affairs and Chief Communications Officer, as its interim CFO. The company has commenced a search for Mr. Alt’s successor.

SEC filing – 8-K Cardinal Health CFO

Houston-based distributor sold for $1 billion

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Distribution International, a Houston-based company backed by Advent International, is being acquired for $1 billion in cash. The purchaser is TopBuild Corp, based in Florida.



DI was founded in 1986 from the merger of three Gulf Coast distributors. It is a leading distributor of insulation and related supplies for commercial and industrial buildings in North America. Its corporate office is based in downtown Houston.

TopBuild is a distributor of insulation and building products to the construction industry, mostly to the residential market.

DI has had three different PE-backed owners since being carved out from a British company, SIG plc, in 2006. Grey Mountain Partners owned it between 2006-2010, Audax Group between 2010-2014 and Advent since then. The company has made 11 acquisitions over the past six years.

DI had revenues of $747 million for the 12 months ending June 2021 and adjusted EBITDA of $75 million (10%). It has 84 locations in the USA and 17 in Canada.

TopBuild expects to achieve synergies of between $35-$40 million over the next two years, though they gave no specific details of how that would be achieved.

The CEO, COO and CFO of DI all worked for HD Supply at some point. HD Supply is an industrial distributor, based in Atlanta. It was spun off from Home Depot in 2007, went public in 2013 and was reacquired by Home Depot in 2020.

TopBuild Investor presentation

 

Houston company to revise results after overstating Accounts Payable

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DXP Enterprises, an industrial distributor based in Houston, has announced that it is unable to file its latest quarterly report because it has discovered that it has $8 million to $12 million of ‘unvouchered purchased orders included in its trade accounts payable’ that are not valid obligations that will be invoiced or paid.



The company states that some of these balances are more than three years old. In its unaudited results for the six months to June 2021, the company states that any change will likely be immaterial in 2021. For the comparable period in 2020, the amount is less than $1 million. That implies that most of these balances are at least 18 months old.  The company plans to restate the trade accounts payable balance to the correct amount and flush the gain (less tax impact) through retained earnings.

DXP distributes maintenance, repair and operating products to energy and industrial customers, primarily in North America. It has a market capitalization of $567 million. One of its three business segments is Supply Chain Services…

For context, for the past five years, the company has had revenues of between $1 billion and $1.2 billion. It reported net income of $16 million in 2017, $36 million in 2018 and 2019 before making a loss of $29 million in 2020. The trade accounts payable has been around $75 million to $82 million. Therefore, a $10 million dollar error out of $80 million is a big miss.

Moss Adams, the company’s auditor, has not yet completed its review of the proposed adjustment.  Additionally, the company is in ‘the process of assessing the impact of this issue on our assessment that our internal control over financial reporting is effective’.

CFO Kent Yee was appointed in June 2017 and Chief Accounting Officer Gene Padgett joined in May 2018.

SEC filings – DXP – restatement

 

Houston distributor to be acquired for $91 million

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Houston Wire and Cable has agreed to be acquired by OmniCable, a subsidiary of Dot Holdings, which is a family office investment firm specializing in acquiring distribution companies. The price is $5.30 per share which values HWCC at $91 million. The price represents a premium of 39% over yesterday’s closing price.



Houston Wire is a distributor of electrical and mechanical wire and cable with revenues of $300 million. Approximately a third of its revenues come from the energy sector.  The company has its head office near the 610/I-10 interchange on the east side.

The company was founded in 1975. It went public in 1987. It was acquired two years later by ALLTEL Corporation. After the business was sold to a PE firm in 1997, the company went public for a second time in 2006.

For some time, the company has been laboring under high debt level of around $75 million of relatively low profitability levels.

The agreement with OmniCable includes a 30-day ‘go-shop’ period, which permits the Board of Directors and advisors to solicit alternative buyers. However, the company expects the deal to close in late May.

The current CFO is Eric Davis. He was appointed to that role in November 2020 after previous CFO Chris Micklas stepped down in June 2020.

SEC filing – HWCC sale

MRC Global appoints new CEO

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MRC Global has appointed Rob Saltiel as its new CEO. He replaces Andrew Lane, who announced plans to retire in May 2020. Mr. Lane has been the CEO since 2008.

MRC is a global distributor of pipes, valves and fittings to all segments of the energy industry (E&P, midstream including gas utilities, and downstream). The company, formerly known as McJunkin Red Man, was founded 100 years ago and has its headquarters in downtown Houston. It went public in 2012 and has a market capitalization of $778 million.



Mr. Saltiel was formerly the CEO of Key Energy Services.  He was in that role for just 16 months, leaving in December 2019, just ahead of a bankruptcy filing. He did, however, leave with a $2.5 million severance. Prior to that, he was the CEO of Atwood Oceanics from 2009 to 2017.

Mr. Saltiel will receive a base salary of $825,000. He also receives $1.65 million in restricted stock units that will vest over three years and the same amount in performance stock units. These will vest after three years, subject to the performance of the stock price.

Mr. Lane will receive the equivalent of his pro-rated annual salary ($900,000) through the end of the year, his original planned retirement date. Instead of a severance payment, the Board awarded Mr. Lane 600,000 restricted stock units worth almost $6 million.

Kelly Youngblood is the CFO of MRC. He was appointed in September 2019.

SEC filing – MRC Global new CEO

Houston blank check company agrees to reverse takeover

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Landcadia Holdings III, the third blank check company taken public by Tilman Fertitta and Jefferies, has agreed to a reverse takeover with The Hillman Group. The deal values Hillman at $2.64 billion.



Landcadia III went public in October 2020. At the time, the company said that it intended to search for opportunities in the consumer, dining, hospitality, entertainment and gaming industries. Landcadia I became Waitr Holdings (online food ordering and delivery) while Landcadia II recently closed on its deal and became Golden Nugget Online Gaming.  In a left turn, Hillman is not involved in these sectors at all. It distributes hardware to retailers.

Hillman distributes fasteners and work gear to Lowe’s, Home Deport and Walmart. It also has 32,500 machines that cut keys, fobs and perform knife sharpening. Impressively, the business has grown organically in 55 of the 56 years it has been in existence. The one year it didn’t grow was 2009 when sales fell 5%.

The deal is expected to close in the second quarter of 2021. After the close, Mr. Fertitta will have no role in the company, other than being a small shareholder. The company will be based in Cincinnati.

SEC filing – Landcadia III Hillman transaction

Food distributor appoints new CFO

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Sysco Corporation has appointed Aaron Alt as its new CFO. He replaces Joel Grade, who moves to Executive Vice President, Business Development.

Sysco, which has its head office in west Houston, has sales of $52 billion and 57,000 employees. Its market capitalization is $38 billion.



Mr Alt joins from Sally Beauty Holdings in Dallas, where he had been CFO since October 2018. Prior to that he spent six years in various roles at Target and eight years at Sara Lee Corporation. Mr Alt will receive a base salary of $775,000 and a one time cash sign-on bonus of $365,000.

Mr Grade, who joined the company in 1996 and had been the CFO for five years, will continue to receive a base salary of $690,000 in his new role. The BD role will be primarily focused on mergers and acquisitions.

Sysco has been making a number of changes since former CEO, Thomas Bené was jettisoned after two years in the role, in January 2020, with a $6 million cash severance. At the time, the Board, which includes activist investor Nelson Peltz, announced that the company needed to ‘accelerate performance, fully capitalize on scale advantages and drive meaningful operating improvements’.

  • New CEO Kevin Hourican joined from CVS Health. He got over $16 million in cash and equity awards to compensate for forfeited equity from CVS.
  • Last month, the company announced that Michael Foster, the Chief Information and Technology Officer, who only joined the company in December 2019, will leave at the end of the year. He will get a $1.3 million severance (2x base salary).
  • At the same time, Judy Sansone joined from CVS Health as Chief Commercial Officer.
  • Tim Ørting joined in September as President of the International Operations.
  • Marie Robinson joined in March 2020 as Chief Supply Chain Officer.

Understandably, top line sales have dropped dramatically due to the pandemic. In the April-June quarter, sales dropped 42%. In the most recent quarter it was a 23% decline.

SEC filing – Sysco CFO

Houston company removes interim tag off CFO

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Houston Wire and Cable has removed the interim tag off Eric Davis. He had been interim CFO since June when Chris Micklas left to join a start-up company.



Houston Wire is a distributor of electrical and mechanical wire and cable with revenues of $340 million. Approximately a third of its revenues come from the energy sector. It has a market capitalization of $46 million. The company has its head office near the 610/I-10 interchange on the east side.

Mr Davis joined the company in 1993 and initially spent 14 years as the Controller of the company. Prior to being appointed CFO, he was the President of the Heavy Lift division.

He will receive a base salary of $265,000.

You can see the complete list of Houston public companies and their CFO’s on my blog here

 

Houston Wire and Cable – Davis appointment

CFO steps down at Houston distributor

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Chris Micklas, the CFO of Houston Wire and Cable, has resigned, effective July 10, to join a start-up business in another industry.

Houston Wire is a distributor of electrical and mechanical wire and cable with revenues of $340 million. Approximately a third of its revenues come from the energy sector. It has a market capitalization of $46 million. The company has its head office near the 610/I-10 interchange on the east side.



Mr Micklas joined the company in April 2018 and was previously the CFO at Par Pacific Holdings, another Houston public company that is involved in refining. He also worked for the LNG business of BG Group (now part of Shell).

Eric Davis has been appointed the interim CFO. He joined the company in 1993 and spent 14 years as the Controller of the company. He is currently the President of the Heavy Lift division.

SEC filing – Micklas resignation