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Wholesale tech products distributor Tech Data, already No. 108 on the Fortune 500, aims to significantly increase market share with a $2.6 billion acquisition of Avnet's technology business.
Tech Data, with $26.3 billion in revenues last year, announced the deal before the markets opened today. The acquisition is for $2.4 billion in cash and 2.785 million shares of Tech Data common stock, according to a statement.
The deal with Phoenix-based Avnet, which distributes electronic components and computer products, will increase Tech Data's capabilities and reach across technologies and geographies, especially the Asia-Pacific market, say Tech Data officials. For example, following the close of the transaction, Tech Data will expand its operations from 21 to 35 countries worldwide, with Europe comprising 53% of the company's $35 billion pro forma revenues, the Americas 44% and Asia-Pacific 3%, the release states.
Tech Data expects to realize approximately $200 million in present value of tax benefits, the release adds, in the deal. The firm also expects to achieve annual cost savings of about $100 million within two years after closing, primarily from efficiencies related to technology, in addition to duplicative functions and corporate expenses.
“We are excited to announce this transformative transaction, which creates a premier global IT distributor with the most diverse end-to-end solutions from the data center to the living room,” Tech Data CEO Bob Dutkowsky says in the release. “This combination complements our value-added distribution capabilities in Europe and the Americas, while establishing Tech Data's presence in Asia-Pacific, which will be a new market for us. As a result of the enhanced value proposition created through this transaction, Tech Data will be even better positioned to capture opportunities in next-generation technologies, deliver differentiated value to our customers and vendor partners, support career development for our employees and generate strong returns for our shareholders.
The deal is expected to close in the first half of calendar 2017, pending closing conditions and regulatory approvals.
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