Sparks Fly At Rexel

Rexel (RXL) is in the humdrum business of distributing electrical components--wire, cable, lighting fixtures, and circuit breakers. But its Big Board-listed stock sure isn't behaving in a humdrum way. Trading at 7 a share in May, the stock has jumped like a live wire lately: It's now at nearly 12 and rising.

Part of the reason is that big investors sniff a buyout play in Rexel Inc., formerly known as Willcox & Gibbs. A French outfit called Rexel S.A., a worldwide supplier of electrical equipment that already owns 44% of Rexel Inc., may be interested in acquiring the rest: French Rexel has been snapping up shares. In May, it bought 326,000 shares at an average price of 71/8 a share--and in late August, an additional 20,000 at more than 9. "It's always a positive sign when beneficial owners buy more shares in the open market," says Charles LaLoggia, editor of Special Situation Report in Rochester, N.Y. On Sept. 19, Rexel Inc. announced it would buy back as much as 2 million shares, or about 10% of its stock outstanding.

One source says that top brass at French Rexel has expressed a desire to buy all of U.S. Rexel, whose value one analyst puts at 20 a share. Rexel Inc. declined comment.

The French outfit amassed its big stake in U.S. Rexel in 1992, when Willcox & Gibbs acquired Southern Electric Supply from Rexel S.A. In return, French Rexel obtained a major stake in Rexel Inc. After that, the French company received additional shares of U.S. Rexel for providing the company with financing. After selling off its apparel and parts-distribution businesses in 1994, Willcox became a pure play in electrical supplies, with more than 170 distribution centers in 19 states.

Analyst Harry Mortner of Deutsche Morgan Grenfell/C.J. Lawrence notes that Rexel's free cash flow has been mounting, to an estimated 90 cents a share this year and $1.15 in 1996. The strong cash flow has enabled Rexel, which is expected to post 1995 revenues of $1.1 billion, to cut its debt to just $50 million--after paying off $62 million so far this year.

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