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We spoke with Ron Passafaro, president and CEO, ECR International on Dec. 23, the day ECR shareholders officially agreed to sell the company to BDR Thermea.
“The best way to explain this deal is that we used to have 108 shareholders and now we have just one,” Passafaro said. “We remain ECR International with the same people that our customers have come to know and rely on. Except now, we’re going to be better equipped to serve them and to make them more competitive in the marketplace. That’s really what this transaction comes down to.”
The deal brings together a pair of privately-held companies that have nearly 90 years of operations in the United States and more than 300 years in Europe.
ECR has manufactured heating products since 1928 when Earle C. Reed, founded Dunkirk Radiator and Utica Boilers. In 1999, the two companies and the respective businesses they had previously acquired, merged and took Reed’s initials as the company name. Today, ECR’s well-known brand names also include Olsen, Airco, Oennco, RetroAire, Argo and EMI with its headquarters still in Utica, N.Y., and fabrication facilities in Dunkirk, N.Y.
Meanwhile, BDR Thermea, based in Apeldoorn, the Netherlands, is also well-known for brand names such as Baxi, De Dietrich, Remeha, Brotje, Chappee and Baymak. In 2009, BDR Thermea was formed as the result of a merger of the Dutch Remeha Group (formed in 2004 after the acquisition by Remeha of the French De Dietrich Thermique) and the UK market leader Baxi Group. In 2011 BDR Thermea acquired Baymak, Turkey’s third largest heating company. As a result of this international expansion, BDR Thermea tripled its revenues within this time frame.
The acquisition of ECR is part of BDR Thermea’s strategy to expand its operations outside Europe and to drive global expansion.
In a nutshell, the deal enables BDR to enter the U.S. heating market as a domestic player with access to ECR’s brands and established distribution channels. In turn, ECR will have access to BDR’s additional hydronic heating technologies and critical mass.
Passafaro spent 10 years as vice president of sales and marketing for Dunkirk Radiator and then another 11 years as vice president of sales and marketing for ECR before taking the top job in 2010.
TW: Whenever we read about acquisitions, we always wonder, ‘Why now?’ So let’s start our discussion by telling us why this deal happened at this point in time.
Passafaro: You hit the nail on the head. As they say timing is everything in life, and timing clearly drove this transaction. The reason for it is what’s happening in the marketplace. The evolution from non-condensing to condensing boilers is happening in the North American market at an exceptional pace and is stratifying, and we needed to address that.
We have been organic developers of condensing boiler technology ever since we introduced our first 95 percent residential unit in 1996. But having said that, our total marketplace here for boilers is probably about 10 percent of the European market and more likely not much more than 2 percent in condensing so the volume imbalance that's coming from overseas is creating a very competitive situation.
I was just mentioning to a colleague that it wasn’t more than 10 years ago that we had basically eight to 10 competitors in the North American boiler market — most all domestic. Now we probably have nearly 30 — and all that growth is foreign, and all that is on the condensing side.
TW: So the growth of the condensing boiler was a big key to the acquisition.
Passafaro: Absolutely. Condensing boilers for the residential and commercial side. That was the key for us. We were able to strengthen our boiler technology and product line positions as well as our competitiveness. All that means great things for our customers and for the long-term future of our company.
TW: So what’s the appeal then for BDR? Their boilers, such as the Baxi line, have been for sale in the United States for quite some time.
Passafaro: Correct. But BDR’s activities in the United States have been as an importer. With the acquisition, BDR now has the bricks and mortar of ECR’s facilities and those of our distribution partners. That means a lot to them to have real operations on the ground for the U.S. market. You can only achieve so much sending containers of product to a market, especially when the business is so relationship-driven like it is here.
BDR operates in 70 different countries. They have 14 manufacturing facilities throughout Europe. However, this is their first foray into North America with operating facilities, manufacturing, engineering, distribution, sales and marketing and so forth. That’s what they’ve really acquired.
So now we can take their technology, and we can localize it here in terms of making it into an American product. We will take BDR technology and product platforms, and re-engineer them locally to meet market feature preferences, electrical, regulatory requirements and so forth. Having the ability to control and manufacture locally allows us to better meet the customer's needs, and that's what we are all about.
TW: Can you give us an idea of where you will rank in terms of the U.S. boiler market?
Passafaro: In North America, we have long believed we are the third largest residential boiler producer. From our perspective by BDR acquiring us, we become an even stronger player domestically and can begin moving up the ranking more easily. More importantly, worldwide we’ve become the third largest producer and will realize all of those benefits being part of the BDR Group.
TW: Can you tell about what you have specifically in store for the near future?
Passafaro: We have a very aggressive timeline in realizing the synergies of the transaction. Our customers and the market place should be prepared to see new products from us no later than the second quarter of 2016. Clearly we’ll first be expanding our residential condensing line.
TW: You’ve mentioned your customers — distributors and contractors. What will these groups start seeing in the months ahead? Let’s start with your distributors.
Passafaro: The beauty of this particular transaction is that distributors are going to get all the benefits of a larger, more resourced supplier. Yet they’re going to continue to deal with the same responsive, smaller company infrastructure that they’ve dealt with for the last 87 years.
In this particular transaction, our management team stays in place. Our sales and marketing and technical support group stays in place. All the same local people that distributors have come to know and rely on will continue to call on them.
The difference is we’ll be calling on them with more product options and more competitiveness than they’ve ever seen from us.
We just went from a very national company to being able to compete with anybody in the world. And now our distributors just got that benefit, too.
TW: And what can contractors expect?
Passafaro: Contractors are going to see new technology from us. The resources that are available from BDR are world-class. So we’ll be pushing the envelope with new technology, both in terms of thermodynamics, but also in terms of electronics. Our focus will be on providing technology that not only increases efficiency and utility, but to deliver it in a way that makes installers’ lives easier.
An important part of this for our current customers is that ECR remains ECR. And that’s a major factor for BDR; they want to look, walk and act like locals in whatever country that they happen to be in. They do not export management. Having the “local” presence and strategy is a very important part of BDR’s business model.
But most of all, we’re going to be able to deliver more products, more technology and do so at each price point in the marketplace. That’s great for our distributors and our contractors.