LKCM Headwater to Buy Distribution Solutions Group at $35.00 a Share
A newly formed LKCM affiliate is offering $700 million of 2032 senior notes to fund the cash take-private and repay part of the distributor's existing credit agreement.
LKCM Headwater Investments, LLC, an affiliate of Distribution Solutions Group, Inc. (DSGR), said it plans to acquire all of the specialty distributor's outstanding common stock not already held by LKCM Headwater and its affiliates for $35.00 a share in cash.
The take-private is structured as a merger in which Eclipse Acquisitions Merger Sub, Inc., a newly formed corporation controlled by LKCM Headwater, will merge with and into Distribution Solutions Group, with the company continuing as the surviving corporation. The transaction is subject to customary closing conditions, including the requisite approval of DSG's stockholders.
To finance the deal, the Escrow Issuer plans to offer $700 million aggregate principal amount of senior notes due 2032, subject to market and other conditions. The notes will initially be issued by the Escrow Issuer, and gross proceeds are expected to be placed in an escrow account pending satisfaction of certain conditions, including the substantially concurrent consummation of the merger.
Upon release from escrow, assuming the conditions are satisfied, the gross proceeds from the offering, together with an equity contribution from LKCM Headwater into DSG, are expected to be used to fund the share acquisition consideration, repay a portion of DSG's outstanding indebtedness under its existing credit agreement, pay fees and expenses of the offering and merger, and for general corporate purposes, including to finance future acquisitions.
At closing, DSG will assume all of the Escrow Issuer's rights and obligations under the notes, and DSG's subsidiaries that are obligors under its existing credit agreement will become guarantors of the notes. The notes and related guarantees have not been, and will not be, registered under the Securities Act of 1933. They are being offered only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A and to non-U.S. persons outside the United States in compliance with Regulation S.
Distribution Solutions Group is a multi-platform specialty distribution company providing high-touch, value-added distribution solutions to the maintenance, repair and operations, original equipment manufacturer and industrial technologies markets. The company was formed through the combination of Lawson Products, Gexpro Services and TestEquity.
DSG serves over 200,000 customers in several diverse end markets, supported by approximately 4,300 dedicated employees, and ships from distribution and service centers to customers in North America, Europe, Asia, South America and the Middle East.
In connection with the merger, the company intends to file a definitive proxy statement on Schedule 14A. On September 1, 2026, the company, LKCM and certain of their respective affiliates jointly filed a transaction statement on Schedule 13E-3. There can be no assurance that the conditions to the merger will be satisfied or that the merger will be consummated.