KGP Logistics formed through Embarq acquisition

KGP Telecommunications doubled or tripled in size this week as the equipment distributor closed its acquisition of Embarq Logistics, a divested unit of Embarq.

With its new subsidiary, renamed KGP Logistics, KGP Telecom will seek to maintain both its own historical focus on the Bell carrier market and Logistics’ primary focus on smaller independent telcos. And it will retain the additional services, beyond distribution, that each company offered: Where KGP would assemble cables and test products, Logistics would engineer, furnish and install (EF&I) the gear.

“Put us together, we can do both now,” said Trevor Putrah, KGP’s chief operating officer and the son of its chief executive officer, Kathy Putrah.

The acquisition takes KGP from about 200 employees to about 700 and more than doubles its annual revenue, Putrah said (Logistics reported $435 million in revenue last year). However, where Logistics had five distribution centers in the US, KGP has seven, plus five manufacturing sites. The combined company may look to eliminate redundancy in the three states in which both entities have distribution centers, though it will seek customer input on such questions. “A very small percentage” of Logistics’ 2500 customers are also among KGP’s 1000 customers, a KGP spokesperson said. 

Logistics had been struggling under the wing of its beleaguered parent, Embarq, which is also being acquired by a much smaller peer. Logistics’ revenue dropped nearly 7% last year and nearly 18% in the last two years, to $435 million. It lost $6 million last year and $2 million in 2007.

However, in addition to the added scale and synergies the KGP acquisition will yield, Putrah argued that Logistics will have a better chance of success now that it is no longer part of a parent company that did not share its core mission.

“Logistics, as a part of Embarq -- distribution was not their core business,” Putrah said. “For us, distribution is our core business. It’s what my mom’s been doing since 1975 and what this business has done from its inception. We understand that you can’t operate like a service provider to be a distributor.”

As part of the deal, whose terms were not made public, KGP Logistics will continue to serve the needs of Embarq through a four-year contract whose terms were not made public.

Windstream, another mid-sized independent telco, still retains its own distribution arm.