Orlando, Fla.-based Hughes Supply announced in early October that it had entered into a purchase agreement to acquire Southwest Power and Western States Electric, each a large privately owned distributor of electrical utility transmission and distribution (T&D) supplies and equipment in the United States, and, together, one of the largest T&D distributors focused exclusively on the western and southwestern United States and recently, western Canada. Southwest Power and Western States Electric share a common private ownership group.

The agreement specified a purchase price of $123.5 million, payable in cash, subject to post-closing balance sheet adjustments. As of press time, the wholesaler said that it expected the closing to occur Nov. 1, subject to customary closing conditions.

Hughes Supply said in a statement that the maintenance-related nature of the utilities business, along with its use of multi-year alliance contracts with utility providers, makes it less vulnerable to construction cycles, generating a more predictable cash flow. In addition, its efficient use of capital results in a higher return on invested capital than the wholesaler's overall return, making utilities an excellent business with very good underlying fundamentals and long-term growth prospects.

“The acquisitions of Southwest Power and Western States Electric will strategically expand our utilities business to the west and southwest regions of the United States and western Canada, creating one of the largest T&D distributors in the United States and expanding Hughes towards a national platform for continued growth,” Tom Morgan, president/CEO of Hughes Supply, said in a statement.

In related news, the wholesaler said it was offering common stock, priced at $30.00 per share. The offering consisted of four million shares by the company and 300,000 shares by a trust of which David H. Hughes, chairman, is trustee and beneficiary. The company also granted to the underwriters a 30-day option to purchase up to an additional 645,000 shares to cover over-allotments. Lehman Brothers is acting as the bookrunner for the offering. Citigroup and Goldman, Sachs & Co. are serving as joint lead managers, and Wachovia Securities is serving as co-manager.

Hughes Supply also announced details of a private placement of $300 million principal amount of senior notes due 2014, carrying an annual interest rate of 5.50%. These were to be issued to qualified institutional buyers under Rule 144A under the Securities Act of 1933, as amended. The wholesaler said it may redeem the senior notes at any time at a “make-whole” redemption price.

The net proceeds generated from both offerings, expected to be about $411 million in the aggregate, were intended for use in the acquisition of businesses, including the proposed acquisition of Southwest Power and Western States Electric; the repayment of outstanding borrowings under Hughes Supply's revolving credit facility, payment of scheduled principal amortization and interest on the wholesaler's existing senior notes, capital expenditures, working capital needs, and other general corporate purposes. The offering of common stock and the offering of senior notes are not contingent upon one another.