Transaction Creates Premier Global IT Distributor
with the Most Diverse End-to-End Solutions from the Data
Center to the Living Room
Tech Data Corporation (NASDAQ:TECD) today announced that it has
entered into a definitive agreement to acquire the Technology
Solutions business from Avnet, Inc. (NYSE:AVT) for $2.4 billion in
cash and 2.785 million shares of Tech Data common stock, in a
transaction valued at approximately $2.6 billion, based on a 15-day
weighted average closing stock price. Tech Data also expects to
realize approximately $200 million in present value of tax
benefits.
The combination provides increased capabilities
and expanded reach across technologies and geographies to establish
Tech Data as one of the world’s most diverse end-to-end global IT
distributors with operations in 35 countries.
The transaction is expected to be significantly
accretive to Tech Data’s non-GAAP earnings per share in the first
year after closing. Tech Data expects to achieve annual cost
savings of approximately $100 million within two years after
closing, primarily from efficiencies related to technology
platforms, as well as 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,” said Bob Dutkowsky, chief executive officer of Tech
Data. “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. We believe the strategic and financial
benefits resulting from this transformative combination are
compelling for both our company and our stakeholders. We look
forward to welcoming the Technology Solutions team to the Tech Data
family and are excited about the future opportunities ahead.”
Patrick Zammit, president of the Technology
Solutions business, said, “Industry standardization, innovation and
converging technologies have transformed our industry. The broader
portfolio created through this combination will enable both
businesses to better capitalize on these trends, while also
providing new opportunities for Technology Solutions to optimize
and expand its offering, as well as unlock value in ways we could
not historically. Given the strength of our customer and vendor
relationships, our common cultures and values, as well as the
skilled and engaged teams at both businesses, I am confident that
this is a winning combination.”
Tech Data + Technology Solutions: Strong
Platform for Growth and Value Creation
Significantly broadens value-added
distribution business: Technology Solutions is an
established leader in value-added distribution, delivering superior
technology solutions, services, software, and hardware across the
data center, which is complementary to Tech Data’s diversified
portfolio of offerings and strategic areas targeted for growth. On
a pro forma basis, Tech Data’s revenues for the 12 months ended
July 31, 2016 would have increased from $26 billion to
approximately $35 billion, with revenue attributable to complex,
higher-margin data center offerings increasing from approximately
29 percent to 45 percent. Pro-forma non-GAAP operating income for
the 12 months ended July 31, 2016 would have more than doubled,
after expected cost savings.
Increases Tech Data’s ability to
capitalize on key next-generation technologies:
Next-generation technologies, including converged and
hyper-converged infrastructure, security, analytics and the cloud,
represent a more than $450 billion market opportunity, which is
expected to grow at a 13 percent compounded annual growth rate
through 20191. The combination of Tech Data and Technology
Solutions will create a premier IT distributor with unmatched
skills, consultative expertise, and strong partner relationships to
help its customers capture these next-generation technology
opportunities.
Extends reach in new and existing
regions, creating a more balanced geographic footprint:
Tech Data’s data center business is well-established in Europe and
has a growing presence in North America. Overall, these
regions represented approximately 61 percent and 39 percent of Tech
Data’s fiscal year 2016 revenues, respectively. With Technology
Solutions, Tech Data will enhance its customer and product
portfolios in the Americas and Europe, and establish an immediate
presence in the fast-growing Asia-Pacific region, which will be a
new market for Tech Data. Following the close of the transaction,
Tech Data will expand its operations from 21 to 35 countries
worldwide, with Europe comprising 53 percent of the Company’s $35
billion pro forma revenues, the Americas 44 percent and
Asia-Pacific 3 percent.
Expands go-to-market capabilities by
adding complementary skills, vendor relationships and new
customers: Technology Solutions partners with more than 40
of the world’s top IT vendors to address the IT business needs of
20,000 customers in more than 80 countries. Tech Data has similarly
strong and diversified relationships with more than 600 vendors and
105,000 customers. As a combined company, the Tech Data and
Technology Solutions businesses can offer a broader and
differentiated set of solutions to a larger and more diversified
customer base, while enhancing relationships with channel
partners.
Brings together teams with similar
values and cultures: Both Tech Data and Technology
Solutions share a corporate culture centered on providing a
world-class customer experience through teamwork, integrity, a
passion for winning, and innovation. Tech Data expects that these
shared values, as well as the expertise and talent from both
organizations, will support a smooth integration following the
close of the transaction.
Terms and FinancingUnder the
terms of the agreement, which was approved by the boards of
directors of both companies, Avnet will receive at closing $2.4
billion in cash and approximately 2.785 million shares of Tech Data
common stock, representing an approximate 7 percent ownership
position in Tech Data.
Tech Data intends to finance the cash portion of
the consideration through a combination of cash on hand, drawings
under its existing revolver, and proceeds from a new term loan
facility and senior notes, which are backstopped by fully-committed
debt financing from BofA Merrill Lynch.
Following the close of the transaction, Tech
Data will continue to benefit from strong cash flows to support
debt reduction and organic growth initiatives. Tech Data expects to
maintain an investment-grade profile and to reach a target leverage
ratio of approximately 2.5x total debt-to-adjusted EBITDA within 18
to 24 months.
Approvals The transaction is
expected to close in the first half of calendar 2017, subject to
customary closing conditions and regulatory approvals.
AdvisorsBofA Merrill Lynch is
serving as lead financial advisor and Raymond James and Associates
is also serving as financial advisor to Tech Data. Cleary Gottlieb
Steen & Hamilton LLP is serving as Tech Data’s legal
counsel.
Tech Data to Host Investor/Analyst
Conference Call and WebcastTech Data will host a
conference call and webcast today, September 19, 2016, at 8:30 a.m.
ET to discuss the transaction.
The live conference call is available by dialing
(866) 610-1072 from the U.S. or (973) 935-2840 from outside the
U.S. and entering conference code 84578145. Supporting materials,
as well as a link to an audio webcast of the conference call, will
be available at www.techdata.com/investor.
A replay of the conference call will be
available approximately one hour after completion of the conference
call through October 3, 2016 and can be accessed by dialing (800)
585-8367 from the U.S. or (404) 537-3406 from outside the
U.S. The replay confirmation code is 84578145. The webcast
will be archived on the Tech Data website at
www.techdata.com/investor.
(1) IDC – Digital Transformation: Challenges and
Opportunities in 2016, June 2016.
About Tech DataTech Data
Corporation is one of the world’s largest wholesale distributors of
technology products, services and solutions. Its advanced logistics
capabilities and value added services enable 105,000 resellers to
efficiently and cost effectively support the diverse technology
needs of end users in more than 100 countries. Tech Data generated
$26.4 billion in net sales for the fiscal year ended January 31,
2016. It is ranked No. 108 on the Fortune 500® and one of Fortune’s
“World’s Most Admired Companies.” To learn more, visit
www.techdata.com, or follow us on Facebook and Twitter.
Forward-Looking
StatementsCertain statements in this communication may
contain “forward‑looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These
statements, including statements regarding Tech Data’s plans,
objectives, expectations and intentions relating to the proposed
acquisition of Avnet’s technology solutions business
(“Acquisition”), the proposed Acquisition’s expected contribution
to Tech Data’s results, financing and closing of the proposed
Acquisition, the expected timing and benefits of the proposed
Acquisition, Tech Data’s, Avnet’s and the Acquired Business’
financial results and estimates and/or business prospects involve a
number of risks and uncertainties and actual results could differ
materially from those projected. These forward‑looking
statements are based on current expectations, estimates, forecasts,
and projections about the proposed Acquisition and the operating
environment, economies and markets in which Tech Data and the
Acquired Business operate and the beliefs and assumptions of our
management. Words such as “expects,” “anticipates,” “targets,”
“goals,” “projects,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” variations of such words, and similar expressions are
intended to identify such forward‑looking statements. In addition,
any statements that refer to projections of Tech Data or the
Acquired Business’ future financial performance, our anticipated
growth and trends in our businesses, and other characterizations of
future events or circumstances, are forward‑looking
statements. These forward‑looking statements are only
predictions and are subject to risks, uncertainties, and
assumptions. Therefore, actual results may differ materially
and adversely from those expressed in any forward‑looking
statements.
For additional information with respect to risks
and other factors which could occur, see Tech Data’s Annual Report
on Form 10-K filed on January 31, 2016, including Part I, Item 1A,
“Risk Factors” therein, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and other securities filings with the
Securities and Exchange Commission (the “SEC”) that are available
at the SEC’s website at www.sec.gov and other securities
regulators. Readers are cautioned not to place undue reliance upon
any such forward-looking statements, which speak only as of the
date made. Many of these factors are beyond Tech Data’s control.
Unless otherwise required by applicable securities laws, Tech Data
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Tech Data undertakes no duty to
update any forward‑looking statements contained herein to reflect
actual results or changes in Tech Data’s expectations.
Tech Data Contacts
Investors/Analysts:
Charles V. Dannewitz
Executive Vice President and Chief Financial Officer
(727) 532-8028
chuck.dannewitz@techdata.com
Arleen Quinones
Vice President, Investor Relations & Corporate Communications
(727) 532-8866
arleen.quinones@techdata.com
Media:
Brian Kosoy
Director, Corporate Communications
(727) 299-8865
brian.kosoy@techdata.com
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