A long rumored merger between material handling vendors Intelligrated and FKI Logistex finally came together this week, after almost falling apart in recent months over price.

Since late last year, it was known that the two companies, which share a common heritage, were in discussions under which a group of investors that had backed Intelligrated's founding would fund the acquisition of the North and South American business of FKI from Melrose plc, a UK-based investment company that had purchased the former Pinnacle Automation in 2000.

SCDigest sources say the deal almost died this Spring, as Intelligrated's backers, led by Gryphon Investors, lowered the original price range under discussion in the face of a tough market for both materials handling automation and credit to finance the deal.

Those differences were apparently resolved, however, with the merger being announced today. It involves, in a sense, the much smaller Intelligrated (some $120 million in 2008 sales) acquiring the $750 million FKI Logistex business.

Intelligrated's founders - current CEO Chris Coles and president/COO Jim McCarthy, had similar roles at Buschman Conveyor, the largest of the former Pinnacle Automation group of companies. Intelligrated's Mason, OH headquarters is just minutes from the large Bushman offices that are also in the northern Cincinnati area.

After leaving FKI following the Pinnacle acquisition and starting Intelligrated a couple of years later, Coles and McCarthy hired a number of Buschman sales and engineering personnel. The close physical and personal connections should ease the usually difficult effort of integrating the two companies.

Intelligrated has been primarily a conveyor and sortation system provider, while FKI has a number of other businesses under its umbrella, including palletizers, pick-to-light systems, tilt tray sorters, and more.

"The Alvey palletizer business is a real jewel," says Cliff Holste, SCDigest Materials Handling editor who himself spent many years at both Alvey and Buschman. "That will be a great addition to the Intelligrated business."

In addition to enabling Intelligrated to offer a more comprehensive material handing product line, Holste also says it gives the company access to FKI/Pinnacle's strong network of systems integrators.

"I think Intelligrated initially thought they could easily switch many of these integrators over after they launched the new company. They knew the owners all personnally. But it turned out to be a lot more difficult than that, and they did not have a lot of success turning over the long standing integrator relationships FKI had built," Holste added. "This now gives Intelligrated a strong distribution channel over night."

Melrose acquired Pinnacle near the high of the ecommerce boom and related great times for material handling vendors, at a price at the time many thought excessive, which looked even more true as the market tanked in 2001. While FKI had good success generally after the market recovered two years later, there was a persistent sense that FKI did not really fit well or as envisioned in Melrose's overall portfolio.

As SCDigest noted previously, even without the economic downturn, which has been tough on capital intensive material handling investments, there were probably too many material handling vendors chasing too few deals, as several foreign competitors entered the US market in a bigger way over the past few years. We expect to see more mergers and acquisitons in this space beyond this Intelligrated/FKI combination.

Additional note added June 1: SCDigest has learned Intelligrated was able to acquire FKI Logistex for just $40 million plus the assumption of some $76 million in debt. That makes the total purchase price of just $116 million - quite a deal for a $700+ million company.

That compares to some $390 million that FKI paid for the former Pinnacle Automation after FKI had already purchased Mathews Conveyor and Chrisplan.