Distribution Solutions to acquire Hisco for $269.1M at closing

Distribution Solutions Group announced that it reached a definitive agreement to acquire HIS Company, a distributor of specialty products serving high growth industrial technology applications. In connection with this transaction, DSG will combine the operations of TestEquity and Hisco, creating one of the largest suppliers serving the electronics design, production, and repair industries. For fiscal year ended October 31, 2022, Hisco generated sales in excess of $400M and adjusted EBITDA of approximately $29M. In connection with the transaction, DSG has agreed to pay $269.1 million at closing, with a potential additional earn-out payment of up to $12.6M, subject to Hisco achieving certain performance targets. DSG will also pay $37.5M in cash or DSG common stock in retention bonuses to certain Hisco employees that remain employed with Hisco or its affiliates for twelve or more months after the closing of the transaction. DSG anticipates funding the transaction using a combination of its expanded committed credit facility and approximately $100M of equity to be raised in a rights offering to existing stockholders. Luther King Capital Management and its affiliates currently own approximately 77% of DSG’s outstanding stock and have indicated an intention to fully subscribe for their pro rata portion in the rights offering, as well as for their pro rata portion of any rights remaining unsubscribed at the completion of the subscription period. The company anticipates that after giving effect to this combination its net debt leverage on adjusted EBITDA will be between 3.25x to 3.50x at the time of closing. The transaction is expected to close in the second quarter of 2023, subject to regulatory and customary closing conditions.