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Danaher Corp.'s $325-million planned acquisition of Marconi Commerce Systems and its famed Gilbarco gasoline dispenser continues the shakeout of the pump market that has seen two of the big three manufacturers sold and the third file for and then pull itself out of bankruptcy.
The latest move also underscores an emerging trend of multibillion-dollar concerns consolidating the petroleum equipment sector through acquisitions of under- and aboveground apparatus. In the past two years corporate giants such as Danaher, Dover Co. and Franklin Electric Co. have scooped up prominent names representing tank gauging, underground piping, nozzles and dispensers.
Fewer companies controlling greater interest is raising questions about the impact on equipment distributors and petroleum operators. Industry observers speculate the Marconi acquisition will enable Danaher to bundle full-service packages to the emerging hypermarket sector — a notion supported by Danaher itself.
Akin to multicategory companies like Pepsico, which leverages its marketing strength to bundle products and secure prime slotting space in beverage and salty snack sections, Danaher will have at its disposal the nation's largest tank gauging company in Veeder-Root Inc. and one of the dominant dispenser entities to achieve favorable positioning and possible exclusives with distributors, observers say.
On the retail level, Danaher offers an impressive equipment package to high-volume gasoline retailers like groceries and mass merchandisers. "What we see from a retailer's point of view is we will be able to offer an opportunity to put together a company with three of the leading brands and the capability of delivering an array of goods and services from submersible pumps to tank gauging to gasoline dispensers," said Martin Gafinowitz, Veeder-Root's vice president of sales and marketing.
"There are going to be instances where we bundle the best of Veeder-Root and Gilbarco, especially to markets that are less mature," he added. "The hypermarket segment is, of course, an important segment because it represents one of the few markets of new construction."
No Power Play Seen
Gafinowitz, however, emphasized that Danaher is not about to use its clout to pressure distributors into carrying only Danaher's line or insist that retailers carry multiple products.
That is good news for distributors, who have watched extensive consolidation and stagnant sales crimp business. Addressing the Marconi sale, Bob Renkes, president of the Petroleum Equipment Institute, said it was too early to assess its impact on his constituents.
"There are still a lot of questions that need to be answered concerning distribution and bundling and unbundling. It could change the dynamics of the petroleum equipment industry as to how companies like Danaher and Dover manage the lines of distribution," Renkes said.
"We still have four pump companies," Renkes noted, "with three controlling the lion's share. But what we are seeing is major manufacturers offering a wider variety of product."
The deal is set to close in late February. It will result not only in the revival of the Gilbarco brand, which had been subordinated under the Marconi moniker, but will most likely lead to a renaming of Danaher's equipment division to Veeder-Root Gilbarco.
The purchase comes less than a year after Halliburton Co. sold the Dresser Wayne dispenser division to an investment group and dispenser giant Tokheim Corp. emerged from bankruptcy. The sale was precipitated by serious financial problems at Marconi's parent company, the UK telecommunications outfit Marconi plc.