Leviton and OnQ call off merger

Changes to contract terms, conditions breaks the deal
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Sunday, June 1, 2003

HARRISBURG, Pa. - What was touted as a perfect match between the low voltage and electrical markets has since crumbled with Leviton and OnQ terminating their acquisition agreement just days before it was scheduled to close.

The two companies originally planned to finalize the merger between OnQ and Leviton’s integrated network group and lighting business May 1, but called off the deal three days earlier after changes were made to the contract.

Company officials at OnQ called the cancelled deal a disappointment. Officials from Leviton and OnQ had been working on the transaction for six months and had taken steps to integrate the companies, such as combining engineering and marketing efforts.

“There were some last minute changes to terms and conditions of the deal, which really made the deal an unpalatable deal for the OnQ shareholders,” explained Dave Hanchette, vice president of marketing for OnQ, a privately held company.

Company officials could not provide specific details about the changes, but security industry analyst Joe Freeman speculated the deal breaker could have been a change in the funding or control over the newly created company, Leviton OnQ.

“They could have had a terrific relationship,” speculated Freeman, of J.P. Freeman Co.

Together, the companies were expected to control 50 percent of the residential home controls market, with control of the newly created company shared equally between each group. Leviton, whose customers are electricians, home builders and retailers, brought to the table an estimated 31 percent market share, while OnQ, whose specialty is the low voltage market in security and home networking, contributed an estimated 25 percent reach, according to data from the Home Builder Executive Survey.

The idea was that Leviton OnQ would become a powerful player in the residential and structured wiring market, which is now highly fragmented. The company would offer builders and consumers a broad range of choices for their structured wiring and low voltage needs.

Doug Fikse, president of OnQ, complimented Leviton officials; people from both companies became close after working together for months. “There were a lot of friendships that were struck,” said Fikse.

Still, he said while “on paper it really looked like a perfect marriage … there were gradual changes, but when you add them all up, both parties said this is not what we thought we would do.”

Officials from Leviton could not be reached for comment by press time.

In preparation for the acquisition, OnQ made a number of improvements over the past few months, expenses the company might not have undertaken otherwise, said Fikse. That included investing in an electronic data exchange system, enabling companies to place orders electronically. OnQ also re-racked its warehouse here to quadruple its capacity.

“There’s a whole host of things like that,” said Fikse.

Now OnQ and Leviton officials are focusing on dismantling what could have been a force in the residential structured wiring market.