In a move to consolidate the sagging electronics distribution industry, a New York company will pay more than $280 million to acquire Garden Grove-based Richey Electronics Inc. and a majority of Bell Industries Inc. of El Segundo, the companies announced Thursday.
The acquisitions by Arrow Electronics Inc. of Melville, N.Y., the world's largest distributor of electronic components, come amid a lengthy slump in the electronics distribution industry, when stock prices for many of the players, including Richey and Bell, have slumped.
Arrow did not say whether the acquisitions would result in layoffs, but analysts said it is common in distribution industries for significant job losses to occur after mergers.
"There clearly will be a few redundancies, and those will be dealt with," said Richard Berger, chief financial officer at Richey, which has 1,050 employees, including 150 in Orange County and 300 in Sun Valley.
Arrow would pay $95.5 million in cash, or $10.50 a share, for Richey and $185 million for the electronics distribution group of Bell. Bell has close to 800 employees, 250 of them in Southern California.
After the announcement, Richey stock jumped $3 a share, or 44%, to $9.88, which was short of Arrow's bid. Arrow shares fell 31 cents, or 2.4%, to $12.81, and Bell slumped $2.06, or 17.3%, to $9.88. Bell on Thursday warned of weaker-than-expected third-quarter profit.
Arrow has been strong in distributing electronic components such as capacitors, resistors and power supplies to large corporations. The acquisition deals, which were sealed Wednesday evening, should allow the company to move into the market of small and medium-size customers, analysts said.
"We have been trying to grow that internally with special sales groups, and we were making some progress. But it was slow and not as successful as we would have liked," said Robert Klatell, executive vice president of Arrow.
Manufacturers of electronics components have been reducing the number of distributors with which they have been willing to deal, keeping smaller distributors such as Bell and Richey from providing their customers a full range of products.
"The electronic component and distribution industry has been in recession for the last three years, and it has been a very difficult operating environment for all the companies in this niche," said Robert Damron of investment bank Cleary Gull.
The plan to integrate the three companies will take 45 to 90 days, Klatell said. Federal regulators and stockholders of Bell and Richey need to approve the deal, which would give Arrow about 10% of the $6-billion market for distributing electronic components other than semiconductors.
Richey earned $6.9 million in 1997 on sales of $250 million. Bell's electronic components distribution arm had sales of about $500 million.