April 12, 2023
Universal Douglas: Dormant but not Dead
We predict the assets of Universal Douglas will be sold to strategic buyers in the next 90 days
The recent and abrupt shutdown of Universal Lighting Technologies and Douglas Lighting Controls caused employees to be instantly jobless, distributors to scramble for substitutions, specifiers to reengineer projects on the fly, contractors to improvise patchwork solutions due to materials that were ordered but never delivered and agents to take care of their betrayed customers while likely being stiffed on earned commissions since January 31.
When Atar Capital, the private equity firm that purchased Universal Douglas in March 2021, abruptly closed the company on a Wednesday morning in late March, the company also signaled that it was planning to sell the assets of Universal Douglas. While Atar Capital was unsuccessful at flipping its portfolio company for a profit after two years of ownership, it’s likely that the financiers will try to recoup as much capital as possible by selling the assets of Universal Douglas, which, even considering recent calamities, are significant.
It is believed that Atar Capital purchased Universal Douglas for a bargain price, as the deal was made shortly after it became known that Universal Douglas was losing a large chunk of business from North America’s largest lighting manufacturer, Acuity Brands. ULT had been providing Acuity Brands with drivers and LED modules – complete with lens assembly. In 2021, Acuity Brands became more vertically integrated with the purchase of ams Osram’s Digital Systems business unit that came with its own Mexican factory – fitting like a glove to serve Acuity Brands’ multiple factories in Monterrey.
We predict the assets of Universal Douglas will be sold to strategic buyer(s) in the next 90 days
So just because Universal Douglas’ factory is closed and the brands are being operated by skeleton crews that are in business shutdown mode, doesn’t mean that Universal Douglas is going to fade to black, or even 10%. We believe that the assets of Universal Douglas will be sold to a lighting company in the coming weeks and months.
So what exactly could Atar sell?
Universal Lighting Technologies (ULT): ULT is a potentially attractive purchase for a strategic buyer due to its brand recognition, product portfolio and widespread, existing penetration as part of many major lighting manufacturers existing product designs. The products are designed in the U.S. and Canada – and built in Mexico. ULT also has a significant patent portfolio.
ULT is among the market share leaders in LED driver production for North American lighting companies. The company that was once a leader in fluorescent ballasts produces LED drivers, LED modules and some finished goods, too. OEMs are reliant upon many of the ULT drivers for product performance and also for possibly maintaining their fixtures’ DLC, ETL and UL listings. End users and contractors have purchased ULT products through electrical distribution for decades. Friendly technical phone support has been available by calling 1-800-BALLAST, a number that isn’t likely as valuable today as it once was.
ULT also has offices in Alabama and British Columbia.
Douglas Lighting Controls: While Douglas Lighting Controls was not among the top market share leaders in the fragmented commercial controls space, loyal business partners and customers have praised the brand for having good quality products that consistently please customers and satisfy budgets.
Prior to Douglas Controls being acquired by Panasonic in 2010 the company utilized many independent third party contractors to make equipment and fulfill orders. In recent years, the Universal Douglas factory, or maquiladora, in Mexico has become an in-house lighting controls producer that can affordably build products with more consistent quality.
The Mexico Factory: Right over the border from Brownsville, Texas is Universal Douglas’ 200,000 square foot factory in Matamoros, Mexico. As North American lighting manufacturers are exploring ways to become less reliant on Asian components (like LED drivers) the nearshoring capabilities of the Universal Douglas maquiladora could prove to be very attractive to potential buyers.
Sources close to Universal Douglas informed us that the factory recently had excess capacity, potentially allowing for a new owner to expand Mexican manufacturing capabilities if desired. There is currently an ongoing labor dispute occurring at the factory that has potential to invoke Mexican government officials and embargo assets. While that may spook potential buyers the conflict could seemingly be remedied through a successful severance negotiation with the local labor union. The factory could be very appealing to numerous North American buyers.
The Potential Buyers
The brands and all of their assets are currently owned by PE firm, Atar Capital. We predict that ULT, Douglas Lighting Controls and the Mexican factory will be sold to a strategic buyer – possibly a longtime ULT OEM customer who sees value in vertical integration. Signify has Advance & Philips LED drivers. Acuity Brands has its Optotronic LED drivers. Other large lighting brands may want to wean themselves from the drivers of competitors and produce more of their own.
We wonder if Current™ would see value in augmenting its market-lagging Thomas Research Products family of LED drivers with the popular ULT portfolio of products. Doing so would really step up its vertical integration capabilities, and possibly cause less reliance on competitors Acuity Brands and Signify for driver solutions. In the somewhat recent past, Current™ made an unsuccessful bid to acquire the assets of another important lighting brand that fell on hard times. In 2020, Current™ almost acquired the assets of bankrupt Edison Price Lighting at the clearance-rack price of $1.1 million before being outbid at the eleventh hour by Elite Lighting.
There are likely a couple dozen additional potential suitors who would see value in the ULT or Douglas Lighting Controls brands, and the Mexico factory. OEM customers of ULT seem to be most intruiging fits for the ULT portfolio and the Mexico factory. Another controls company, big or small, may see value in picking up the Douglas Lighting Controls portfolio.
How will Universal Douglas be sold?
Atar Capital is a motivated seller. The longer the assets age, the less value they will have. So while the PE firm will want to maximize the asset prices, selling them quickly to one entity may likely be their most desired outcome, but we’re not sure that will happen.
Due to the limited number of potential suitors, and their varying interests, we predict that the assets will be sold in pieces, i.e. ULT and the Mexican factory to one strategic buyer, and Douglas Lighting Controls to another strategic buyer. In that scenario, it’s possible that Douglas would maintain ULT’s Mexican maquiladora as a contract manufacturer for its controls products. A win-win.
When will the Universal Douglas assets be sold?
Time is of the essence. Every week that ticks off the calendar diminishes the value of the assets. Even though many employees would be unlikely to return to the company, the ones who would consider the notion may soon land new jobs and have no interest in a reunion tour – even if the brands are under new management.
Our shot in the dark prediction: Acquisition announcement(s) of ULT, Douglas Lighting Controls and the Mexican factories will occur before June 30.
Overall, the potential sale of Universal Douglas’ assets highlights the challenges facing some US-based manufacturing companies, particularly in the wake of the pandemic, inflation and global supply chain disruptions. However, the company's strengths, including its brand equity, expertise in manufacturing and its Mexican factory, make it an attractive proposition to potential buyers looking to diversify their supply chains, augment their product portfolios and strengthen their position in the market.
