Grubbs: Anixter Limited On Repaying DDI Suppliers

Jason Sandefur

Following a bidding war with Fastenal Co. to acquire bankrupt Distribution Dynamics Inc., Anixter Inc. CEO Robert Grubbs notified suppliers about the good and bad news of the acquisition.
In A June 22 letter, Grubbs pointed to Anixter”s overall financial stability as the “good news” about the DDI deal.””It is important that we both turn to the future and work on building a lasting and healthy relationship,” Grubbs stated.
But he also stressed the importance of being””candid about what we each can and cannot do””in relation to the large debt many vendors are owed by DDI. Bankruptcy court records revealed that DDI owed suppliers at least $8.4 million. Those vendors are unlikely to be paid because Anixter was forced to pay as much as 30% more for DDI than originally offered.
In an earlier letter, dated April 26, Grubbs had told suppliers that Anixter would make offers to purchase “certain valid supplier claims” for products delivered before DDI filed for bankruptcy. But according to Grubbs, that scenario was complicated by the active bidding process”that drove DDI”s final price from $25 million to $32.8 million. Because Anixter”s eventual bid increased more than 30%, the company now has “very limited financial flexibility”” in relation to debts held by suppliers, Grubbs explained. “As a result, while we may still make offers to purchase some such claims, the amount, if any, purchased will be substantially less than originally conceived,””Grubbs noted.
“It is important to recognize that one of the larger contributing factors to this situation … were the owners and managers [of DDI] who paid unrealistic prices for the businesses they acquired,” Grubbs wrote.
DDI has already asked for open credit terms from its vendors. Web: anixter.com �2004 FastenerNews.com