Mega Merger: Lagasse Acquires Sweet Paper

Long respected as a pure jan/san wholesaler with the national size to negotiate lower prices from manufacturers, Lagasse Inc., New Orleans, recently announced that it has acquired Sweet Paper, a Hialeah, Fla.-based wholesaler that specializes in foodservice supplies and paper products.

The acquisition is significant on a number of levels. Lagasse, a 55-year-old wholesaler of jan/san supplies, currently has 26 locations nationwide and more than 10,000 products in stock. Sweet Paper offers distributors more than 10,000 products also and has 10 warehouse facilities throughout the Southwest and in California, Texas and Massachusetts. Sweet Paper did $250 million in sales last year.

“Sweet Paper has certainly been an outstanding family-run company for the last 50 years,” Todd Shelton, Lagasse’s senior vice president recently told SM. “They have a complementary product portfolio, because while they are also in the jan/san business, they certainly have a thriving operation in the foodservice, restaurant and hospitality supply business.”

The combined strength of the two powerhouse wholesalers will increase Lagasse’s sales capacity by 60 percent, and gives the company a stronghold on the Southeast, a region where Lagasse has had a relatively weak presence in the past.

“We’re definitely pleased that this acquisition brings three new strategic markets for us: Orlando, Raleigh, and Nashville,” said Shelton.

Perhaps most significantly, Lagasse will nearly double its shipping capacity.

“We will have more trucks on the road delivering to our customers, bringing a higher level of service, which for a wholesaler is absolutely critical,” said Shelton.

“We can now reach 99 percent of the population in metro areas in the United States within one-day service,” he adds. “When distributors make an order, they should be able to receive it by the next day at the latest.”

The exact financial figures of the acquisition were not yet available, because the two companies have not finished negotiating, but the merger appears to be beneficial for Sweet Paper, as well.

“We see this as a wonderful opportunity for Sweet Paper customers, suppliers and employees,” said Michael Scheck, president of Sweet Paper. “Lagasse has established an excellent reputation as a leading wholesaler of core janitorial and sanitary supplies. Our family welcomes the opportunity to work with the Lagasse team as we bring a broader product offering, category knowledge and enhanced service to Lagasse.”

Sweet Paper executives will stay on with the new company, said Shelton.

NEWS MAKERS

New York City Adopts Plan To Curtail Pesticides
An advocacy group for environmentally friendly products, Beyond Pesticides, and the New York Public Interest Research Group (NYPIRG) announced that New York City recently enacted a law that will begin restricting “hazardous” pesticide use on all city land. Also signed was legislation requiring commercial landscapers to give neighbors prior notice before spraying pesticides.

CEO Wants Dial Corp. To Stay In Scottsdale
The Dial Corp., an international manufacturer of soaps and cleaning chemicals for both at-home and commercial markets, will likely stay in Scottsdale, Ariz., if its new chief executive officer has a choice, says the East Valley Tribune.

Brad Casper — who took control of the company less than one month ago — gave hope to Scottsdale residents when he responded to rumors that Dial’s R&D center would abandon the city in 2008. Casper said that he wanted to maintain the community/company relationship that Dial has enjoyed in Scottsdale.

EPA Subpoenas DuPont
The U.S. Environmental Protection Agency (EPA) recently announced that it has subpoenaed Dupont Co., the No. 2 U.S. chemical manufacturer for alleged misuse of perfluorooctanoic acid (PFOA), an essential ingredient in making Teflon non-stick coatings. The subpoena was carried out in late May by the U.S. Department of Justice.

ABM Wins Prestigious Manhattan Contract
American Building Maintenance Co., New York, a national building service contractor, recently announced that it has been awarded a contract to maintain and clean 125 Park Avenue, a 25-story 577,000-square-foot “class A” office building.

Federal junk fax regulations will go into effect July 1, 2005, for all businesses, ISSA’s legislative department recently reported. Businesses will be required to have prior written permission in order to lawfully send “commercial faxes” to individuals, including their current customers and vendors. However, the regulations will not go into effect if one of two things happen before that time: 1) Congress passes the ISSA-supported Junk Fax Prevention Act (S. 714); or 2) The FCC grants an extension of the effective date of the new regulations.

According to ISSA, distributors should support S. 714 because it takes a “pragmatic” approach to business-fax regulations. ISSA urges distributors and other business owners to contact their federal Senators (especially those on the Senate Commerce Committee) and representatives to voice their support of S. 714.

MERGERS & ACQUISITIONS

In the May/June issue of Progressive Distributor magazine, a feature article titled “The Big Orange Box Woos Uncle Sam” detailed evidence that The Home Depot is following a strategy to supply government buildings and agencies with maintenance and cleaning equipment.

“The government market is approximately a $10 to $12 billion market based on Home Depot’s comments to Wall Street, but remains highly fragmented with numerous distributors serving the customer,” writes the Oliver Ardery of Progressive Distributor. “This provides a great opportunity for industry consolidation, potentially allowing the Big Orange Box to become a 900-pound gorilla within the MRO (maintenance, repair and operations) government market.”

Ardery writes that Home Depot made “the first step” by obtaining two U.S. General Service Administration (GSA) Schedule contracts in 2003, making it the largest retailer and first home improvement company with a GSA Schedule contract. “The GSA Schedule contract is a critical first step to seizing government revenue because it streamlines the federal procurement process by enabling customers to purchase MRO products from Home Depot’s retail stores or catalog.”

Home Depot has more than 1,800 locations across North America, which helps the company leverage sales to government agencies like the GSA. However, there are still open opportunities to smaller, service-oriented jan/san distributors who develop contacts with GSA purchasing agents, says Caldwell Smith, president and owner of Mid-American Chemical Supply Co., Louisville, Ky.

“There are a lot of distributors who just sit on the GSA waiting lists and don’t do anything, but if you keep asking and visiting with the purchasing agents, opportunities to sell to the GSA in your local area are sure to open up,” says Smith.

In June, the National Federation of Independent Business (NFIB) released quarterly reports detailing information about the small-business economic climates and business conditions in the 26 largest state economies.

Based on an extensive survey of small-business owners in each of the 26 states, the report parses through survey data in a variety of categories — upgraded technology, employee cost pressures, sales, employment, profits, reason for optimism, reason for pessimism, credit availability and overall state business environment, just to name a few.

The state of California’s small-business climate, for example, was reported to be near the bottom. California’s score dropped 17 points, to negative 1 percent small-business support, from the previous quarter. Only the state of Washington had a worse rating, negative 4 percent. “By comparison, neighboring Arizona had a positive 32 percent and Oregon racked up a positive 20 percent,” said the California report.

The best rating among the 26 small-business state economies was North Carolina with a 42 percent net-supportive environment.

Despite California’s poor survey results, Martyn Hopper, state director for the 35,000-member California arm of NFIB, said that the news is not all bad for the state’s small businesses.

“Before anyone panics, read the report fully,” says Hopper. “California did come in around the middle on four other key categories, such as business conditions, sales, profits and prospects. This report tells a tale of two states: one where small businesses survive in spite of a legislature hostile to them; and another of a legislature that cannot quite kill the entrepreneurial spirit in spite of its best attempts.”

The report also allows readers to observe which economic issues small-business owners identify as most critical. In Wisconsin, for example, owners ranked insurance as the biggest problem, followed by taxes.

To find the NFIB small-business climate results for your state and others, just visit NFIB.com.