Avnet's Technology Solutions business is to be sold to Tech Data for $2.6 billion.
Tech Data will pay $2.4 billion in cash in addition to shares valued at about $200 million. The deal, expected to close in the first half of 2017, is projected to leave Avnet with a gain $3.75 to $4.75 a share.
At a time where distributors are struggling to remain in business with more manufacturers promoting direct relationships with customers, Tech Data's size has enabled it to distribute products from Apple, Microsoft and more. The company sells to customers in more than 100 countries, with Europe accounting for the majority of revenue. One of the big draws from Tech Data's perspective is Avnet's established presence in the Asia-Pacific region.
Speaking to Bloomberg, Bob Dutkowsky, Tech Data’s chief executive officer, said that distributors remain an important and efficient sales channel for technology products. He noted that hardware makers like Dell, which had once sold only direct-to-consumer, have moved back to using distributors like Tech Data and that customers increasingly wanted “one-stop shopping” for all their software and technology needs. In order to keep the company relevant, Dutkowsky said that it is moving more towards cloud-delivery, mobile, intelligent cars and the Internet of Things.
"All of the motion in technology was moving away from the sweet spot we had lived in, which was in the office, on the desktop. This purchase extends our footprint and gives us skills we don’t have today and positions us for the next wave of technology."
Tech Data will hope that this deal will rebalance the company's geographic revenue mix. Currently 60 percent of revenue comes from Europe and 40 percent from the Americas.
As for Avnet, the company will look to continue building on its "world-class design chain and supply chain solutions" while continuing to deliver on its current commitments to customers.
A statement from Avnet CEO Bill Amelio said:
By now you may have heard the exciting news about Avnet. We have entered into a definitive agreement to sell Avnet Technology Solutions to Tech Data. We believe Technology Solution’s data center and business solutions expertise will complement Tech Data’s broad and diversified portfolio of offerings, creating new opportunities for our customers and suppliers.
?Moving forward, Avnet will focus on strengthening our portfolio of world-class design chain and supply chain solutions. As an industry leading components distributor, we will expand our digital capabilities and build our solutions portfolio in support of embedded, IOT and the maker market. Our overarching goal is to become more efficient and productive – and deliver flawless customer service. Bottom line, we intend to be a premier service provider to the industry.
We believe that there will be many reasons for all of our customers and suppliers to be excited about this combination and the value that Avnet and Tech Data will be able to provide as a result, but today is just the first step. Until the transaction closes, Avnet Technology Solutions and Tech Data will continue to operate as separate, independent businesses.
We are fully committed to delivering on commitments to all of our customers and suppliers now and in the future. Our service levels will not be affected, current contracts will be honored and until the transaction closes there will be no changes to how we work with you.
On behalf of the Avnet team, we appreciate your business and look forward to working with you to help you realize the possibilities of technology.