PITTSBURGH, Dec. 26, 2019 /PRNewswire/ -- WESCO
International, Inc. (NYSE: WCC) ("WESCO"), a leading provider of
electrical, industrial, and communications MRO and OEM products,
construction materials, advanced supply chain management and
logistics services, confirmed today it has delivered to the Anixter
International (NYSE: AXE) board of directors an improved proposal
to acquire Anixter, a leading global distributor of Network &
Security Solutions, Electrical & Electronic Solutions and
Utility Power Solutions, for $93.50
per share in cash and stock.
The scale, earnings power and significant free cash flow of the
combined business would accelerate growth and deliver increased
shareholder value. This proposed transaction would bring together
WESCO's and Anixter's diversified product offerings, broad customer
relationships, extensive global footprint and service capabilities,
and substantial intellectual and human capital to create a premier
electrical and data communications distribution company. Together,
WESCO and Anixter would be positioned to invest in digital
transformation on a faster timeframe, benefit from growth and
operational synergies, and accelerate the combined company's growth
and profitability.
WESCO's proposal of $93.50 in cash
and stock consists of the following:
- Consideration per Anixter share of $63.00 cash plus a fixed exchange ratio of 0.2397
shares of WESCO common stock plus $16.65 of a newly created class of WESCO
perpetual preferred stock. Based on the closing price of WESCO's
common stock on December 26, 2019,
the total consideration represents $93.50 per share.
- Anixter stockholders would participate in all the value upside
in the WESCO common stock. The common stock consideration would be
subject to downside protection, such that if the average market
value of WESCO common stock prior to closing is between
$46.23 per share and $57.79 per share, then the cash consideration
paid at closing would be increased by up to $2.77 per share to ensure that the total
consideration remains at $93.50 per
Anixter share.
- The perpetual preferred stock is expected to have a fixed
market rate of approximately 9.25% (representing a spread of 325
bps over the prevailing unsecured notes to be issued to enact the
transaction), subject to reset and a five-year non-call feature,
and will be listed on the New York Stock Exchange.
- Together, the upfront consideration and Anixter stockholders'
share of the capitalized synergies represents a significant value
opportunity of over $100 per share
for Anixter stockholders.
- Based on the number of shares of WESCO and Anixter common stock
currently outstanding, it is anticipated that WESCO stockholders
would own 84% and Anixter stockholders 16% of the combined
company.
Mr. John J. Engel, WESCO's
Chairman, President and Chief Executive Officer, commented, "This
transaction would advance WESCO's strategic objective of becoming a
leading service-focused global supply chain solutions company. With
increased scale, complementary capabilities and industry-leading
technologies, together, we would be ideally positioned to digitize
our business, expand our extensive services portfolio and supply
chain offerings, and deliver solutions to our customers whenever
and wherever they need them. Importantly, stockholders of both
companies would be able to participate in the substantial upside
potential of the combined organization, including its enhanced
strategic profile and competitiveness, as well as the significant
expected synergies and earnings accretion.
"The scale, earnings power and significant free cash flow of the
combined business would accelerate growth and deliver increased
shareholder value. We also intend to quickly reduce leverage and be
within our target range within 24 months post close. We strongly
believe this transformative combination is in the best interests of
both companies' stockholders and that our proposal represents a
Superior Company Proposal compared to Anixter's current agreement
with CD&R."
Compelling Strategic and Financial Rationale
- Enhances Scale and Global Position. The combined company
would have significantly enhanced scale, with pro forma 2019E
revenues of approximately $17
billion. WESCO would also have increased international
exposure, with approximately 9% of revenues generated outside of
the U.S. The increased scale would enable the combined company to
invest in digital transformation and innovation on a faster
timetable, and provide a platform for growth in attractive emerging
markets.
- Broadens and Diversifies Product Portfolio. The combined
company would have a comprehensive and balanced portfolio that
brings together WESCO's capabilities in industrial, construction,
utility and commercial, institutional, and government with
Anixter's expertise in data communications, security, and wire and
cable. Combining the companies' complementary products, services,
and solutions is expected to create significant cross-selling and
up-selling opportunities, strengthening the combined company's
customer value proposition.
- Delivers Substantial Synergy Opportunity. WESCO expects
to realize annualized run-rate cost synergies of greater than
$200 million by the end of year-three
through a reduction in corporate and regional overhead, including
duplicative public company costs, branch and distribution center
optimization, and efficiencies in procurement, field operations and
supply chain. In addition, the combined company would be
well-positioned to enhance growth by providing cross-selling
opportunities of complementary product offerings to its expanded
customer base.
- Provides Immediate and Significant Earnings Accretion.
The combination is expected to be meaningfully accretive to WESCO's
earnings on a standalone basis in the first full year of ownership,
as well as result in significant earnings growth and margin
expansion.
- Ability to Rapidly De-Lever. At closing, WESCO estimates
that its pro forma leverage on a net debt to EBITDA basis would be
approximately 4.5x. WESCO intends to utilize the strength of the
combined company's cash flows, including significant synergies, to
reduce its leverage quickly and ultimately intends to be within its
long-term target leverage range of 2.0x – 3.5x within 24 months
post-close.
WESCO Perspective on Clayton, Dubilier & Rice
("CD&R") Objectives
WESCO believes the combination creates tremendous value for
WESCO and Anixter stockholders. CD&R clearly shares this view,
which is reflected in CD&R's interest in owning and combining
both companies.
CD&R's most recent agreement with Anixter provides
$86.00 per share in cash at closing
and $2.50 per share of contingent,
capped upside from a potential combination with WESCO, in the form
of a Contingent Value Right ("CVR"). The value of the CVR is highly
speculative and the ability for Anixter stockholders to receive any
value from the CVR is beyond CD&R's sole control. WESCO's
proposal has no such contingency and provides $93.50 per share of value at closing and
participation in substantial additional value upside, which is
uncapped and is expected to deliver over $100 per share to Anixter stockholders as
synergies are realized.
CD&R's approach to WESCO was an attempt to deprive WESCO and
Anixter stockholders of the significant value creation opportunity
from a combination, and to capture that value for CD&R's own
benefit.
Mr. Engel continued, "WESCO has completed the requisite due
diligence on a potential transaction and is prepared to immediately
move forward with its proposed transaction. We urge the Anixter
board of directors to accept our proposed transaction, and obtain
the benefit of combining our companies for their stockholders."
Financing
The transaction is not subject to a financing condition. WESCO
has obtained fully committed debt financing from Barclays for the
cash portion of the transaction. WESCO intends to fund the required
cash consideration with a combination of long‐term debt financing
and additional equity or equity‐content securities.
Approvals and Timing to Close
The proposed transaction is subject to Anixter's board of
directors, in consultation with its legal and financial advisors,
determining that the WESCO proposal constitutes a "Superior Company
Proposal" as defined in Anixter's previously announced merger
agreement with CD&R. Anixter would then terminate the merger
agreement with CD&R concurrently with the execution of the
definitive agreement with WESCO, following expiration of CD&R's
matching rights.
The WESCO transaction is subject to Anixter's stockholder
approval, receipt of regulatory approval in the U.S. and certain
foreign jurisdictions, as well as other customary closing
conditions. WESCO anticipates the transaction could be completed in
the summer of 2020.
Advisors
Barclays is serving as financial advisor to WESCO, and Wachtell,
Lipton, Rosen & Katz is serving as legal advisor.
About WESCO
WESCO International, Inc. (NYSE: WCC), a publicly traded Fortune
500 holding company headquartered in Pittsburgh, Pennsylvania, is a leading
provider of electrical, industrial, and communications maintenance,
repair and operating (MRO) and original equipment manufacturer
(OEM) products, construction materials, and advanced supply chain
management and logistic services. 2018 annual sales were
approximately $8.2 billion. The
company employs approximately 9,300 people, maintains relationships
with approximately 30,000 suppliers, and serves approximately
70,000 active customers worldwide. Customers include commercial and
industrial businesses, contractors, government agencies,
institutions, telecommunications providers, and utilities. WESCO
operates 11 fully automated distribution centers and approximately
500 branches in North America and
international locations, providing a local presence for customers
and a global network to serve multi-location businesses and
multi-national corporations.
Forward-Looking Statements
All statements made herein that are not historical facts should
be considered as "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results to differ materially. Such
risks, uncertainties and other factors include, but are not limited
to: adverse economic conditions; the ultimate outcome of any
possible transaction involving WESCO International, Inc. ("WESCO")
and Anixter International Inc. ("Anixter"), including the
possibility that the parties will not agree to pursue a business
combination transaction or that the terms of any definitive
agreement will be materially different from those described herein;
uncertainties as to whether Anixter will cooperate with WESCO
regarding the proposed transaction; WESCO's ability to consummate
the proposed transaction with Anixter; the conditions to the
completion of the proposed transaction, including the receipt of
any required stockholder approvals and any required regulatory
approvals; WESCO's ability to finance the proposed transaction with
Anixter; WESCO's indebtedness, including the substantial
indebtedness WESCO expects to incur in connection with the proposed
transaction with Anixter and the need to generate sufficient cash
flows to service and repay such debt; the possibility that WESCO
may be unable to achieve expected synergies and operating
efficiencies within the expected time-frames or at all and to
successfully integrate Anixter's operations with those of WESCO;
that such integration may be more difficult, time-consuming or
costly than expected; that operating costs, customer loss and
business disruption (including, without limitation, difficulties in
maintaining relationships with employees, customers or suppliers)
may be greater than expected following the proposed transaction or
the public announcement of the proposed transaction; the retention
of certain key employees may be difficult; actions that may be
taken by Clayton, Dubilier & Rice; and other factors described
in detail in the Form 10-K for WESCO for the year ended
December 31, 2018 and any subsequent
filings with the Securities and Exchange Commission (the "SEC").
These forward-looking statements speak only as of the date of this
communication or as of the date to which they refer, and WESCO
assumes no obligation to update any forward-looking statements as a
result of new information or future events or developments, except
as required by law.
Disclaimer
This document shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which the offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
Additional Information and Where to Find It
This communication does not constitute an offer to buy or
solicitation of an offer to sell any securities. This communication
relates to a proposal that WESCO has made for a business
combination transaction with Anixter. In furtherance of this
proposal and subject to future developments, WESCO (and, if
applicable, Anixter) may file one or more registration statements,
proxy statements, tender offer statements or other documents with
the SEC. This communication is not a substitute for any proxy
statement, registration statement, tender offer statement,
prospectus or other document WESCO and/or Anixter may file with the
SEC in connection with the proposed transaction. INVESTORS AND
SECURITY HOLDERS OF WESCO AND ANIXTER ARE URGED TO READ THE PROXY
STATEMENT(S), REGISTRATION STATEMENT, TENDER OFFER STATEMENT,
PROSPECTUS AND/OR OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN
THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE AS THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Any
definitive proxy statement(s) or prospectus(es) (if and when
available) will be mailed to stockholders of WESCO and/or Anixter,
as applicable. Investors and security holders will be able to
obtain free copies of these documents (if and when available) and
other documents filed with the SEC by WESCO through the web site
maintained by the SEC at www.sec.gov, and by visiting WESCO's
investor relations site at http://wesco.investorroom.com/.
Participants in the Solicitation
This communication is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC. Nonetheless, WESCO and its directors and
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transactions. You can find information
about WESCO's executive officers and directors in WESCO's proxy
statement for its 2019 annual meeting, which was filed with the SEC
on April 15, 2019 and in WESCO's
Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC
on February 27, 2019. Additional
information regarding the interests of such potential participants
will be included in one or more registration statements, proxy
statements, tender offer statements or other documents filed with
the SEC if and when they become available. These documents (if and
when available) may be obtained free of charge from the SEC's
website www.sec.gov, and by visiting WESCO's investor relations
site at http://wesco.investorroom.com/.
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SOURCE WESCO International, Inc.