PrimeSource acquires 3-G’s Supply
The wave of consolidations among building material distributors—those two-step players who sell to lumberyards and home centers—has yet to materialize, despite the elongated drop in building activity. But for 3-G’s Supply, a successful family owned fastener wholesaler, the time has come to cash out. The company announced on Feb. 21 that it sold its operations to PrimeSource Building Products, the industry’s 11th largest distributor, for an undisclosed price.
Headquartered in Strongsville, Ohio, just outside of Cleveland, 3-G’s Supply served Michigan, Indiana and parts of Kentucky and Pennsylvania. But in Ohio, on their home turf, 3-G’s Supply was the dominant player. Although Prime Source ships through out North America from its net work of 35 branches, its presence in the Cleveland market was not strong. The 3-G’s acquisition will both capture market share and fulfill a geographic need for the Carrollton, Texas, distributor.
3-G’s also operated a satellite warehouse in East Brunswick, N.J., not far from a large Prime Source distribution center in Edison. Both companies sell to the same type of customers: lumberyards, home centers, specialty building material retailers and industrial customers.
“We had the best possible mix of customers that anyone could ask for,” said 3-G’s owner George Miller, whose father started the company in 1974. Although Miller’s two sons were both working in the business, the family decided that 2008 was the time to sell.
“The last three years have been the best in the history of the company, and it’s better to do something like this on the way up than on the way down,” Miller said. Sales in 2007 were “almost identical” to 2006, he added, and profits were up last year. (Miller did not provide sales figures, but Experian Business Reports estimates 3-G’s annual sales at $5 million.)
“The cream rises to the top” during economic down turns, Miller observed. “Our customers are all financially rock solid. They didn’t skip a beat and neither did we.”
One of those customers was Carter Lumber, the Kent, Ohio, pro dealer that relied on 3-G’s for its private labeled fasteners. “3-G’s has been a great partner for the past 28 years,” said Paul Barnaby, vp-purchasing for Carter Lumber. “In all that time, they earned the respect of our corporate office and more importantly our stores. We wish them all the best and look forward to our increased relationship with Prime Source to carry on the service level we became accustomed to with 3-G’s.”
Prime Source plans to continue 3-G’s private label program, which also supplies fasteners to Do it Best, according to vp and national sales manager Paul Redwood. The $1.4 billion distributor is also exploring 3-G’s nut and bolt program. “We might bring that to other distribution centers,” Redwood said.
Of course, Prime Source also wants to sell its wide assortment of building materials from 3-G’s distribution center near Cleveland. In particular, Redwood would like to introduce 3-G’s customer base to the Grip-Rite brand, originally developed for hand-driven fasteners but now encompassing everything from poly-sheeting to air hoses. This year, the company plans to add fencing, concrete accessories, and a line of collated screws to its Grip-Rite offerings.
There are even bigger plans a foot for the privately owned firm, which was purchased by Itochu International in 1998. Prime Source is led by co-CEOs Ken Fishbein and Mona Zinman, whose mandate is to double the size of the company by 2011. Last fall, Prime Source purchased Pacific Steel and Supply, one of the largest independent nail distributors on the West Coast, for an undisclosed sum. The 55-year-old company operated three warehouses, two in California and one in Washington State.
“We are in acquisition mode,” stated Redwood.
Although M&A activity is still at a slow pace among home channel wholesalers, this could change as the down turn drags on. “We’re hearing dramatic [revenue] fall-offs among distributors focused on residential construction,” said Rick Peters on, president of the Specialty Tools & Fasteners Distributors Association (STA FDA). With sales drops of 30 percent to 50 percent, many of these distributors are looking to diversify beyond construction. “It’s an on going theme at group meetings, seminars and discussions,” Peters on said.
But developing new accounts and shifting inventory takes time. “It’s like turning a freighter,” said Peters on, whose Seattle firm, All-West Fasteners, does half of its business in the electronics world. When that industry experienced a down-turn in 2000 and 2001, there was no wave of consolidations, according to Peters on. “Many of the smaller players just went away,” he recalled.