APi Group, Inc.

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APi Group, Inc.

2366 Rose Place
St. Paul, Minnesota 55113
Telephone: (651) 636-4320
Fax: (651) 636-0312
Web site: http://www.apigroupinc.com

Private Company
Incorporated: 1948
Employees: 5,000
Sales: $800 million (2003 est.)
NAIC: 551112 Offices of Other Holding Companies; 235110 Plumbing, Heating and Air-Conditioning Contractors; 235310 Electrical Contractors; 562910 Remediation Services; 235990 All Other Special Trade Contractors; 332322 Sheet Metal Work Manufacturing; 332312 Fabricated Structural Metal Manufacturing; 33241 Power Boiler and Heat Exchanger Manufacturing; 532412 Construction, Mining and Forestry Machinery Leasing; 561621 Security Systems Services (Except Locksmiths); 421330 Roofing, Siding and Insulation Material Wholesalers

APi Group, Inc., is a private holding company for about 27 subsidiaries that provide various construction, specialty contracting, and maintenance services mainly for industrial and commercial clients. The subsidiaries are grouped into five main areas of operation: Fire Protection Systems, Specialty Construction Services, Special Systems, Distribution, and Fabrication and Manufacturing. Fire protection, including installation of sprinkler systems and wildfire suppression, accounts for more than half the company's business. Other subsidiaries are active in insulation and electrical contracting, plumbing, boiler maintenance, heating and ventilation, garage door installation, asbestos abatement, building security systems, steel fabrication, distribution of construction materials, the manufacture of air ducts, and the rental of aerial work platforms. Most of the APi Group's construction and contracting-related subsidiaries are located in Minnesota and surrounding states, but the company's fire protection holdings extend as far as Texas, California, Canada, and the United Kingdom. The APi Group has its roots in a small insulation contracting firm founded in the 1920s in St. Paul, Minnesota. The company attained its current scope as the result of an acquisition strategy directed by CEO Lee Anderson, son of the company's founder.

A Small Contractor Beginning to Grow: 194884

Although the APi Group was incorporated in 1948, it grew out of a plumbing and heating company started by Reuben L. Anderson around 1924. This contracting company was located in St. Paul, Minnesota and did business as Reuben L. Anderson-Cherne Plumbing. By the late 1920s the company also had branched out into asbestos and pipe insulation and the distribution of insulation materials. In 1948 the insulation-related activities were spun off into a separate firm known as Asbestos Products. This firm included divisions that eventually would develop into the subsidiaries APi Distribution, a wholesaler of insulation products for industry, and APi Construction Company, an insulation contractor for the utility, energy generation, petroleum, and paper industries. Anderson operated Asbestos Products as an independent sister company to his plumbing firm for about three decades. Asbestos Products changed its name to APi Inc. in the 1970s. Anderson eventually sold his interest in the plumbing firm in 1979.

Reuben's son Lee Anderson joined the firm in 1964 at the age of 25 when his father granted him a 50 percent interest in the company. At the time, APi had about 30 employees and annual revenues of $120,000 from its insulation distribution and contracting activities. Lee Anderson became president of the company and began a series of acquisitions in the 1970s that greatly expanded APi's scope of operations.

Anderson's first acquisition was the 1969 purchase of the Industrial Sprinkler Corporation, a fire protection company located in St. Paul that had been founded 15 years earlier. This was followed by the purchase of Anco Products, Inc. in 1972. Anco was a young firm in Elkhart, Indiana, engaged in the production of flexible heating and cooling air ducts. The company also made the Textrafine brand of insulation, a resilient long-fiber insulation used in cryogenic tanks for the storage of liquefied natural gas. Another subsidiary, APi Supply, Inc., was established in St. Paul in 1977 as a sales and rental firm for aerial work platformsmachines used to lift loads high into the airincluding scissorlifts and boom lifts from manufacturers such as Snorkel, JLG, SkyJack, Workforce, and Upright. In 1981 APi bought Industrial Contractors, Inc. (ICI) of Bismarck, North Dakota. ICI was a construction service and maintenance firm with a particular focus on boiler maintenance and process piping in power plants. The company could be contracted to perform scheduled plant shutdowns for maintenance purposes, and also worked in steel erection, siding, metal roofing, electrical, and plumbing contracting. The Andersons also entered the banking sector during this time. Reuben Anderson bought a northern Minnesota bank in 1975 and expanded it to neighboring towns. Lee Anderson sold the chain to Norwest Corp. for a considerable profit in 1997 and retained two banks under the name Anderson Financial Corp. The banks were not part of APi, but Lee Anderson kept his main office in Golden Valley at the financial company while serving as president of APi.

Increasing the Pace of Acquisitions: 198595

As APi's list of acquisitions grew, Anderson's associates noted that he demonstrated a knack for good timing in his deals and for developing employee loyalty. He continued to keep his eye out for promising firms that were available for acquisition and would complement APi's existing operations. The pace of acquisitions increased in 1985 when APi gained three more subsidiaries. The first was Viking Automatic Sprinkler Company, with offices in Duluth, Rochester, and St. Paul, Minnesota. Viking had been established in 1924 and had the capability to fabricate sprinkler systems in-house for installation at new construction projects. A second acquisition was The Jamar Company, a Duluth-based contractor working in metal roofing, siding, sheet metal fabrication, piping, and ductwork for the paper, food processing, and mining industries. Jamar also constructed and repaired power boilers. The company had been established in 1913 by Walker Jamar, Sr., and had sales of $45 million at the time of the acquisition. APi's third acquisition that year was a building materials wholesaler located in the Minneapolis suburb of Fridley. The company was known as Reserve Supply but changed its name to APi Supply Company after the acquisition.

Of the three 1985 acquisitions, The Jamar Company experienced the most rapid growth. Jamar management wanted the company, which at the time was a straightforward union contractor, to diversify into construction businesses unrelated to union contracting. Jamar bought the Arrowhead Mechanical Contracting Company, a 45-year-old plumbing, heating, and process piping business, in 1986. The next year it acquired ASDCO, a northern Minnesota building products wholesaler that developed into Jamar's distribution division. ASDCO formerly made sales via telephone, but Jamar opened an outlet to showcase ASDCO's products. In 1988 Jamar's headquarters moved from Canal Park Drive to a 65,000-square-foot West Duluth facility that was four times as large as its former site. Jamar's construction services division started up in 1989 to sell and rent aerial lift equipment, forklifts, scaffolding, and temporary heating equipment.

Another three acquisitions joined the APi Group in 1989. Two of them worked in structural steel fabrication: L.L. LeJeune Steel Company of Minneapolis, which had been in business since 1944, and Wisconsin Structural Steel Company of Barronnet, Wisconsin. Wisconsin Structural Steel shared its management and inventory with LeJeune after the acquisition but remained a separate subsidiary. The third acquisition that year was Western States Fire Protection Company. Western had been established in Denver in 1985 and had offices in Dallas and Houston. Over the next few years, Western's scope expanded as APi acquired and merged several other fire protection companies in western states. Western gained offices in California, Kansas, Colorado, Oregon, Texas, and Nevada.

In 1990 APi became part of an alliance seeking to build a 175-mile toll road around the Twin Cities metro area. The company formed the Minnesota Tollway Authority Inc. with several partners to pursue this goal. The proposed toll road met with criticism from people who did not like the idea of paying a toll or who were concerned the project would encourage urban sprawl. APi was losing money on the venture and dropped out of the alliance as it became clear the project would not gain government approval.

APi bought Industrial Fabricators, Inc. and National Fire in 1994. National Fire was merged into Western States Fire Protection. Industrial Fabricators, in business since 1975, made large industrial silencers used for safety and environmental purposes. The firm fabricated metal silencers at a plant in Thorp, Wisconsin and sold them to power plants and other facilities worldwide. The Twin City Garage Door Company was acquired by APi in 1995. The firm had been established in 1966 and grew to be one of the largest full-service garage door companies in the Twin Cities area.

Company Perspectives:

Since its first acquisition in 1969, the APi Group has adhered to one philosophy: offer the finest customer-driven service by using common resources and shared experiences. APi Group's reputation for successfully completing complex projects and our concern for safety has secured the company's highly respected position in the industry. While member organizations continue to prosper, exciting new opportunities for growth and expansion are on the horizon. APi Group will continue to fund promising acquisitions and new ventures while supporting current member companies as they generate high levels of productivity and deliver outstanding service.

Meanwhile, The Jamar Company was continuing its decade-long path of rapid expansion. In 1990 Jamar established Sonneman Construction in Cloquet, Minnesota as a boiler maintenance and repair division. In 1992 Jamar bought Arrowhead Refrigeration, a northern Minnesota refrigerator service and repair business. Jamar opened an office in Upper Michigan in 1993 because it had won several contracts from that area in the past. In 1995 Jamar's Construction Service Division partnered with Acme Tool Crib of the North to distribute woodworking and construction tools; they were displayed in the same show-room as the construction products available from ASDCO. Overall, Jamar was developing a versatile range of services to attract customers who wanted to work with a single contractor rather than dealing with separate businesses for each stage of a construction project. The company hired mechanical engineers and installed computer-aided design systems so that it could offer complete design-build services.

Late 1990s Expansion in the Fire Protection Sector

In the second half of the 1990s APi acquired more than a dozen domestic and international fire protection companies, making this the company's dominant line of business. Statewide Fire Protection of Las Vegas, which specialized in installing sprinkler systems in casinos, was bought in 1996 and rolled into Western States Fire Protection. APi also purchased VFP Fire Systems, Inc. and Vipond Fire Protection that year. VFP had been established in 1927 and did work in Ohio, Indiana, Michigan, Pennsylvania, Kentucky, Alabama, Texas, and West Virginia. Vipond, in business in Canada since 1945, had offices in the province of Ontario. Both Vipond and Western States Fire Protection expanded in 1998 when several smaller companies were acquired and merged with them. Western got RLT Fire Protection, Inc. of San Diego, which worked in residential sprinkler systems, and Universal Fire Equipment Co. of Dallas, a fire alarm and detection contractor. Vipond was enlarged with an array of Canadian fire protection firms: Sask Fire Protection and Advantage Fire Protection of Calgary, Alberta; Integrated Protection of North Bay; JP Theoret Electric, Ltd. of Montreal; Nichols-Radtke Sprinkler of Hamilton, Ontario; Ultra Alarm Services Ltd. of Moncton, New Brunswick; and Island Electric, Regional Alarms & Security of Sudbury, Ontario.

These all became part of the parent company Vipond, Inc. In addition, Vipond bridged the Atlantic to buy A&A Fire of Glasgow, Scotland. The Canadian offices all became part of Vipond Fire Protection, Inc. while the United Kingdom site changed its name to Vipond Fire Protection, Ltd. Both divisions became part of the parent company Vipond, Inc. Ironically, amid the accumulation of fire protection subsidiaries, APi experienced a fire in 1998 at Anco, the air duct and insulation producer in Indiana. Some ductwork on the fiberglass line caught fire one afternoon and, although all employees were safely evacuated, equipment damages amounted to $2 million.

Vipond was further enhanced in 1999 with the acquisition of Cronin Fire Equipment of Ottawa, Alsask Fire Equipment of Regina, Saskatchewan, and Firestop of Belfast, Ireland. That year APi also bought Security Fire Protection Company, Inc. of Memphis, Tennessee. Security Fire Protection was founded in 1966. Because Memphis was a national distribution center, it developed particular expertise in sprinkler systems for refrigerated and frozen storage facilities, developing technologies that became industry standards. In 1999 APi also established Western States Fire Protection Company of Alaska.

By the late 1990s APi had grown to be one of the top 500 private firms in the nation. Revenues in 1998 were $423 million with a profit of $22 million. By 1999 fire protection had grown to account for 60 percent of APi's revenues, up from 30 percent five years earlier. Yet the company showed no sign of slowing down. APi bought US Fire Protection and Alliance Fire Protection, both based near Chicago, in 2000. Alliance had been founded in 1995 and did general design and installation of sprinkler systems. US Fire Protection had been in business since 1986. It worked mainly with residential systems, with a particular focus on retrofitting existing structures to comply with changing fire codes. Later in 2000 APi bought Communication Systems, Inc., with offices in Casper, Wyoming and Rapid City, South Dakota. This company had been founded in 1986 and provided design, installation, and support services related to closed circuit television, patient wandering systems, gas detection, nurse call systems, infant protection, and security. A similar company, Northern Fire & Communications of Montana, was acquired the following year. Northern Fire & Communications had been providing integration of low-voltage call, alarm, and intercom systems since 1984. The company's main office was in Kalispell, Montana, with branches in Billings and Missoula. Both Northern Fire and Communication Systems became divisions of APi Systems Group, Inc., the parent company for APi's hazard, alarm, and security system operations. Vipond also had developed a division, Vipond Systems Group, active in this sector.

Key Dates:

Asbestos Products is incorporated to work in installation and distribution of insulation.
Lee Anderson joins his father's business.
APi makes its first acquisition, that of Industrial Sprinkler Corporation.
Anco Products, Inc., a flexible duct and insulation manufacturer, is acquired.
APi Supply, Inc. is established to sell aerial work platforms.
North Dakota contractor Industrial Contractors, Inc. is acquired.
The Jamar Company, Viking Automatic Sprinkler, and APi Supply Company are acquired.
Western States Fire Protection and two steel fabrication companies are acquired.
VFP Fire Systems and Vipond Fire Protection of Canada are acquired.
About a dozen fire protection acquisitions expand the company's reach in Canada, the United Kingdom, and the western United States.
Recently acquired electrical contractors Lakehead Electric and Thompson Electric are merged to form APi Electric.
ABATECO, Inc. is formed to focus on asbestos and lead abatement.

Continued Growth into the New Millennium

Aside from the acquisitions related to fire suppression and alarms, APi experienced some developments in the construction and contracting fields in the late 1990s. In 1997 the company bought New Reach Co., Inc. of Wisconsin. This firm was a wholesaler that leased aerial lift equipment. New Reach was sold to Rental Services Corporation a year later. A longer-lasting acquisition in 1997 was Lakehead Electric, a contractor based in Duluth, Minnesota. Lakehead had been in business since 1963 and provided electrical design services, installation, and emergency outage support for local giants in the paper, pulp, and mining industries, including Potlatch Corporation, Northshore Mining, Blandin Paper, and U.S. Steel. With APi's backing, in 1999 Lakehead launched the Lakehead DataCom division devoted to security systems, fire alarms, fiber optics, and data communications.

In 1998 APi sold its building materials wholesaler APi Supply Company (but retained APi Supply, Inc., the aerial work platform rental company). The subsidiary was sold in part because Home Depot, which had its own distribution system, was moving into rural areas and threatening APi's territory. The sale led to a loss of about $135 million in annual revenues, but ongoing acquisitions in the area of fire protection made up for it.

APi established a new subsidiary, Halon Banking Systems, in 1999. This company's area of business was the environmentally responsible management, redeployment, and destruction of halon, a compound used in fire extinguishers. The firm was located in St. Paul and sent extinguishers to affiliates in Denver and Dallas to be refilled.

In 2001 APi bought Doody Mechanical, Inc., a St. Paul-based contractor providing services to larger institutions such as schools, housing projects, industrial sites, retail locations, and places of worship. Doody's services included heating, ventilation, air conditioning, plumbing, process piping, and sheet metal fabrication. The company had been founded in 1959 and formed a sheet metal division in 1985 so that it could fabricate HVAC duct systems in-house. Also in 2001, APi acquired Thompson Electric of Cloquet, Minnesota. Thompson had been established in 1919 to install fire alarms and police call boxes and branched out to electrical contracting in 1928. The company changed hands several times over the years; by the time it landed at APi, annual revenues were around $7 million. Two years later Thompson merged with Lakehead Electric to form APi Electric, the largest commercial electrical contracting firm in the region. Thompson's strength was in commercial electrical services, while Lakehead focused on industrial and highway lighting. Both were also active in computer cabling, security systems, closed circuit television, and other low-voltage services.

Late in 2003 APi bought Windy City Fire Protection of Chicago and merged it into Alliance Fire Protection. In 2004 the APi Construction Company, the insulation contractor in the group, spun off a new subsidiary to emphasize asbestos and lead abatement services. The company was known as ABATECO, Inc. It won a contract to register the asbestos present in Xcel Energy's Bayport power plant. Meanwhile, APi's other subsidiaries were carrying out contracts in their respective areas of business: Viking Automatic Sprinkler company had recently installed a sprinkler system at Best Buy's new headquarters in Richfield, Minnesota; Doody Mechanical and Western States Fire Protection had teamed up to install the piping and sprinkler system, respectively, for a new Cabela's outdoor gear store in Kansas; and Jamar had recently fabricated and installed an air flow system for Willamette Paper in Kingsport, Tennessee. Each subsidiary was contributing its piece to APi's loosely related array of specialized mechanical, construction, distribution, and life protection operations.

Principal Subsidiaries

ABATECO, Inc.; APi Construction Company; APi Electric; APi Supply, Inc.; Doody Mechanical, Inc.; Industrial Contractors, Inc.; The Jamar Company; Twin City Garage Door Company; Anco Products, Inc.; Industrial Fabricators, Inc.; Lejeune Steel Company; Wisconsin Structural Steel Company; Alliance Fire Protection, Inc.; Security Fire Protection Company, Inc.; US Fire Protection, Inc.; Viking Automatic Sprinkler Company; VFP Fire Systems, Inc.; Vipond, Inc.; Western States Fire Protection Company; ASDCO; APi Distribution; APi Systems Group; Communications Systems, Inc.; Halon Banking Systems; Northern Fire & Communication.

Principal Divisions

Specialty Construction Services; Fire Protection Systems; Fabrication and Manufacturing; Distribution; Special Systems.

Principal Competitors

Grinnell Corporation; Express Garage Doors Inc.; Herc-U-Lift; United Rentals; EnviroTech Remediation Services, Inc.

Further Reading

Beal, Dave, "API's Low-Profile Empire," St. Paul Pioneer Press, August 4, 1999, p. 1B.

King, Marshall V., "$2 Million Fire Ravages Anco," Elkhart Truth (Ind.), February 10, 1998.

Laine, Burton, "Building Blocks," Duluthian, March 1, 1997, p. 12.

Mark, Terry T., "Anco Gets Loan," Elkhart Truth, February 2, 2001.

"Two Duluth, Minn.-Area Electrical Contracting Firms to Merge," Duluth News-Tribune, March 4, 2003, p. 1.

Whereatt, Robert, "Toll Highway Would Link I-35W with I-94 Through Northern Metro Suburbs," Star Tribune, November 21, 1990, p. 1A.

Sarah Ruth Lorenz