Fastenal Company (NASDAQ:FAST) has agreed to acquire the assets of Manufacturer’s Supply Company (Mansco). The terms of the agreement remain undisclosed.
The benefits of the agreement to the companies
The agreement is expected to take effect before the end of March. Fastenal will benefit by gaining an advantage in the market footprint with commercial furniture Original Equipment Manufacturers constantly referred to as OEMs. Mansco on the other hand will gain additional equipments to serve their customer base.
Mansco general performance
Mansco declared 2016 sales of approximately $50 million. A larger amount came from its flagship Michigan zone. The company generated sales from two other units in McAllenm TX and Madison, AL. Fastener is positive that the agreement will lead to a gradual improvement in the financial status of the company in the next 12 months. This change however may not translate to earnings per share.
The growth process in Fastenal
Fastenal growth has been gradual. It started off from a humble beginning as a fastener distributor to a full line industrial supplier. It has increased its products and services to involve government sales, internal manufacturing division, metal working, industrial vending and internet sales. However the company has indicated a slowdown in the 2016 from 2015. The company reported 2.4% decrease in the forth quarter in 2016 compared to the same quarter in 2015.
Analysts state that unfavorable product mix, pricing and competitive pressure, over emphasis on growing average store sales and lack of inflation could be associated with the declining growth in Fastenal. The gross margin increased 50 basis points in the fourth quarter it was still less 10 basis points from last year’s fourth quarter. The The overall growth in 2016 declined by 80 basis points. The acquisition of Mansco is expected to help the company improve its revenue status.
The management in Fastenal indicated that the company is in a fairly stable margin environment. They are positive that the recent improvements in the fourth quarter on non fasteners, better purchasing and a higher mix of sales of exclusive brands will offset the current mix headwinds. If the company succeeds in averting the gross margin decline the shares price should reflect the same. Its code on the NASDAQ stock listing is FAST.