Essendant Inc. and Genuine Parts Co.—diversified distributors each looking for a market edge in challenging times—said today they’ve agreed on a merger plan designed to play up each company’s strengths.

The deal merges Essendant with GPC’s S.P. Richards Co., a long-time competitor in the distribution of office supplies. Combined, the two distribution organizations did about $7 billion in 2017 sales—$5 billion for Essendant and $2 billion for S.P. Richard, according to the companies.

S.P. Richards, which operates a customer portal for office products dealers at SPRdealerservices.com, brings to Essendant long-time expertise in serving business customers—a crucial skill-set at a time when Essendant has said it needs to focus on customer service to drive revenue after recent revenue setbacks. Essendant, formerly known as United Stationers, is coming off a tough 2017, when sales fell 6.2% from the prior year, reflecting declines across multiple product categories at the diversified distributor.

Ric Phillips,
president and CEO, Essendant

“By bringing together two businesses with long histories, complementary product lines and a shared customer-centric approach, we are creating a much stronger, better-positioned company,” Essendant president and CEO Ric Phillips said in announcing the deal today. Phillips will lead the combined company, which will retain the Essendant name.

Essendant estimates that the merger will bring more than $75 million in annual cost savings stemming from improved efficiency in product sourcing, supply chain, selling and general administrative tasks.

While Essendant’s total net sales fell 6.2% last year to $5.04 billion, its e-commerce sales inched up 0.5%, to $755.6 million, accounting for 15% of net sales in 2017, up from 14% the prior year.

For GPC, where office products sales comprise only one of several business lines, the loss of S.P. Richards will free up the company to concentrate more on its core strengths in global distribution of automotive and industrial products. “This transaction is the result of a comprehensive process to maximize the value of S.P. Richards and represents a key step in the execution of Genuine Parts Co.’s long-term strategy by enabling us to increase our focus on our larger, core global automotive and industrial businesses,” said Paul Donahue, GPC’s president and CEO.

Although GPC’s revenue has increased steadily in recent years, hitting $16.31 billion in 2017, up 6.3% from 2016, its net income has been heading in the opposite direction, declining 10.3% last year to $616.76 million.

In a move to shore up its strengths, last year GPC acquired several distributors—including automotive parts suppliers Monroe Motor Parts and Alliance Auto Group, and industrial and agricultural products supplier Apache Hose & Belting. Monroe Motor Parts offers online ordering through the Web Shop ordering system provided by Parts Plus, a division of the Automotive Distribution Network. The Web Shop online ordering system lets repair service dealers, corporate fleets and other clients research available inventory and place orders for products.

GPC’s flagship operation—NAPA Auto Parts Stores—operates the e-commerce site NapaOnline.com.

Other GPC units are:

• Motion Industries Inc., a distributor of industrial parts ranging from metal-cutting tools to motor vehicle transmission gears. It sells online at MotionIndustries.com.
• EIS Inc., a distributor of electrical and electronic products, which sells online at EIS-inc.com.

Essendant, in addition to its traditional core market of office supplies, sells industrial products and automotive industry tools—both online and offline—through several corporate divisions. They include:

• ORS Nasco, including industrial supplies for construction, oil field and other markets;
• Medco and AIM, among other brands, for automotive industry equipment and tools;
• CPO Commerce, for power tools sold to consumers.

Essendant sells through an internet platform to thousands of distributors, wholesalers, resellers and dealers, and provides e-commerce technology and services to help many of them sell through their own e-commerce sites.

The merger between Essendant and S.P. Richards, which has been approved by each company’s board, is expected to close before the end of this year, subject to regulatory and shareholder approvals. The merger has been structured as a Reverse Morris Trust. Under terms of the agreement, GPC will spin off S.P. Richards as a separate company to GPC shareholders before merging it with Essendant. GPC shareholders will then receive shares in Essendant, with the transaction valuing S.P. Richards at approximately $680 million. Essendant will also pay approximately $347 million in cash to GPC.

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