Deal expected to close in fourth quarter of 2004; CEO Eric Salzer and RSG's management team will remain in place

Direct Energy has agreed to acquire Residential Services Group, a plumbing and HVAC services provider for residential and light commercial markets, for a $150 million in cash. The deal is expected to close in the fourth quarter of 2004.

This will be the second acquisition of RSG since its split from Encompass Services Corp., which filed for Chapter 11 reorganization in 2002. In 2003 Dayton, Ohio-based RSG was purchased by Wellspring Capital Management where its "strong management team, market leadership and steady cash flow" gained the company 27 locations in 17 states.

For the year ending July 31, 2004, RSG recorded sales of $308.6 million. The company employs roughly 2,000, and completes nearly 200,000 service calls a year.

Direct Energy is a part of Centrica, a multi-state provider of deregulated retail energy services. It owns 5 million customer relationships in North America. According to the company, this acquisition will give Centrica the opportunity to replicate a model it runs in the UK, which cross-sells home services through an established customer base.

"RSG gives us a very broad footprint in the U.S. that is complementary to our existing markets and provides reach in new markets in which we have no presence," says Cynthia Cordova, director of media relations for Centrica North America.

Eric Salzer, RSG's CEO, headed Encompass' residential operations. Salzer has worked most of his professional career in the HVAC industry, and has seen firsthand the rise and fall of the consolidation movement. Encompass rolled up several companies nationwide under one name, but later was forced to sell off many of these companies, some back to their original owners.

Since name recognition is so powerful in the service business, RSG will remain a separate company with its management team in place, including Salzer.

Sir Roy Gardner, chief executive of Centrica, says, "In RSG we are acquiring a first-class management team that has also built a profitable customer base, in which there may be opportunities to cross-sell energy in the future."