W.W. Grainger Inc, North America’s leading broad line distributor of MRO products, has announced it has entered a definitive agreement to acquire Cromwell Group (Holdings) Limited together with its subsidiaries on a cash-free, debt-free basis for GB£310 million.
Established in 1970 and headquartered in Leicester, Cromwell is the largest independent MRO distributor in the United Kingdom, serving more than 35,000 industrial and manufacturing customers worldwide with more than 80,000 industrial products. It has more than 2,150 employees. Sales for the fiscal year ending 31st August 2015, are forecast at GB£283 million with the vast majority coming from the UK; EBITDA margins are expected to be approximately 10%.
Grainger says the UK and Germany are two of the largest e-commerce markets in Europe, though adoption is lower than in the United States. It believes there is a compelling opportunity in the UK to grow its MRO online model, similar to that already accomplished in Japan with MonotaRO and in the United States with Zoro.
“We have demonstrated that when we have a broad product line and supply chain scale, as we do in the United States, we can develop a profitable online model very quickly. Cromwell is a great company with an outstanding product offering, strong management team, and stable supply chain and will be a strong addition to Grainger,” said Jim Ryan, chairman, president and CEO at Grainger. “Cromwell’s solid foundation will enable us to accelerate the growth of the online model in Europe within the next six months. Over the next five years we expect sales growth from low single digits to approaching double digits, and EBITDA margins to improve from 10% to 15%. This acquisition will also accelerate the profitability of Zoro Germany.”
“The large economically mature markets of Europe and Japan present the greatest opportunity for growth outside of North America and our online businesses across these regions are rapidly growing,” Ryan continued. “In Japan we have helped build the most successful MRO startup business in the last 20 years, MonotaRO, which is growing in excess of 20% annually in local currency. In the United States we launched the Zoro business, which is expected to reach US$300 million in sales this year after just four years, and we are seeing strong results from the launch of Zoro Germany. We believe we can achieve similar success with Cromwell.”
Online sales are currently less than 5% of Cromwell’s total sales. Upon completion, expected in September, Grainger intends to operate Cromwell as a standalone business unit led by current managing director, Michael Kerins.
Will joined Fastener + Fixing Magazine in 2007 and over the last 15 years has experienced every facet of the fastener sector - interviewing key figures within the industry and visiting leading companies and exhibitions around the globe.
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