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Tech Data To Acquire Avnet Technology Solutions

With its $2.6 billion acquisition of the Technology Solutions portion of Avnet Inc., Tech Data Corp. would bolster its datacenter business and gain a toehold in the Asia-Pacific region.

The blockbuster distribution deal, announced Monday and involving a mix of $2.4 billion in cash and 2.785 million shares of Tech Data common stock, is expected to close in the first half of 2017.

From a revenue standpoint, the deal would make Tech Data about a third larger. Pro forma revenues for the 12 months leading up to July 31 would have been $35 billion for the combined company rather than Tech Data's $26 billion.

Avnet Technology Solutions (ATS) is a much smaller operation with about 40 vendors and 20,000 customers compared to Tech Data's 600 vendors and 105,000 customers. But ATS' focus on converged and hyperconverged infrastructure and other next-generation datacenter technology is a big part of what Tech Data found attractive.

According to the companies, in the year leading up to July 31, "revenue attributable to complex, higher-margin datacenter offerings" would have accounted for 45 percent of total revenue for the combined companies, compared with 29 percent for Tech Data alone. Operating income would have more than doubled over the same period, on a pro forma, non-GAAP basis while accounting for some expected cost savings, the companies said.

The move also gives Tech Data some presence in the Asia-Pacific region where it doesn't currently compete. The company would go from having operations in 21 countries today to 35 countries upon close. Tech Data's current revenue mix is 61 percent in Europe and 39 percent in North America. With ATS included, the mix would be 53 percent in Europe, 44 percent in North America and 3 percent in Asia/Pacific.

Posted by Scott Bekker on September 19, 2016


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