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Private Equity Opens Wallets For Distributor Businesses

Nortek Acquired By British Firm

Nortek, the Rhode Island conglomerate that supplies specialty dealers and custom integrators with everything from A/V products and smart-home devices to range hoods, has agreed to be acquired by Melrose Industries, a British equity investment firm, for about $2.8 billion.

The all-cash deal is expected to close by Aug. 31.

Nortek president/CEO Michael Clarke said the purchase “will enhance Nortek’s ability to further leverage its industry-leading brands and market positions to continue driving profitable growth. We believe this transaction will be a positive for our employees and customers alike.”

Added Melrose chairman Christopher Miller, “We see a company full of hard-working, dedicated people who are really good at what they do. We can harness those strengths by meaningful long-term investment and a vision based on our own experience in similar and relevant markets down the years. Melrose has been a highly successful custodian and builder of U.S. businesses and we are confident that we can bring that expertise to build Nortek for the long term.”

Nortek’s portfolio includes the Core Brands group, comprised of such audio, power management and video distribution brands as Elan, SpeakerCraft, Gefen, Niles, Panamax, Proficient, Furman, Sunfire and Xantech.

Its Security & Control subsidiary produces smart connected devices and systems for the residential, security, access control and digital health markets under such brands as 2Gig, GoControl, Linear and Numera.

On the ventilation side, its Broan-NuTone, Best and Zephyr brands are leaders in the range hood and bath fan businesses.

Melrose buys, reorganizes and flips undervalued industrial and engineering businesses including Elster, Dynacast and Brush Turbogenerators.

Nortek itself has faced steep losses in recent years, which ballooned to as much as $56 million in 2011. Last year the company posted a 15 percent decline in net income, to $3.9 million, while net sales slipped 0.8 percent to $2.5 billion.

Nortek rejected an unsolicited buyout offer last year, reportedly from United Technologies, following a review of strategic alternatives by its board and advisors.

This time, the purchase price “represents a significant premium for our shareholders,” Clarke said, although a shareholders rights law firm, Johnson & Weaver, has already launched an investigation to determine whether Nortek’s board breached its fiduciary duties by failing to obtain the best possible price for Nortek’s stock or adequately pursued alternatives to the sale.

AVAD Sold To Kingswood

Ingram Micro has sold AVAD, its custom integration distributor subsidiary, to Kingswood Capital Management, a private equity investment firm.

Terms of the deal were not disclosed.

Kingswood, which specializes in buying and buttressing “businesses in transition,” has brought in A/V industry veterans Tom Jacoby and Fred Farrar to helm AVAD as CEO and president, respectively.

Jacoby, a former CEO of Harman Consumer Group, was also vice chairman and corporate development officer of Klipsch Group, and later served as chairman and corporate development officer of Tymphany, a Hong Kong-based ODM and OEM speaker supplier.

Farrar, a former executive VP of Audiovox, also served as a director and operations executive VP for Klipsch Lanham Investments, a private investment firm with CE and real estate holdings.

Kingswood said it brings to the party executive leadership, operational resources and the necessary capital for AVAD to realize its longterm strategic goals, which includes extending its customer base into “underserved markets.”

“As the market leader in distribution of premium audio and video solutions, AVAD is poised to grow its product offering and distribution reach under new leadership,” said Alex Wolf, a Kingswood managing partner.

Jacoby noted that he and Farrar had been customers of AVAD, and plan to invest in the distributor’s infrastructure with a focus on “using web-enabled technology to deliver added value to all of our trading partners.”

Farrar added that the company will “build on the most respected line card in the business and further strengthen AVAD’s renowned customer service, technical support and system design capabilities.”

AVAD is a leading distributor of high-end A/V solutions for the commercial and residential custom installation markets in North America, with more than 10,000 customers across the U.S. and Canada.

Former corporate parent Ingram Micro, a global IT distributor, is itself about to be acquired by Chinese conglomerate HNA Group for $6 billion.