Transaction Valued at Approximately $4.5
Billion
Delivers Greater Scale with Enhanced Geographic
Footprint and Supply Chain Services
Combined Platform Provides Significant Growth
and Cross-Selling Opportunities
Expected to Generate Over $200 Million of
Annual Run-Rate Cost Synergies by End of Year Three
Strong Combined Cash Flows, Enhanced Margins
and EPS Accretion in First Full Year of Ownership
WESCO to Host Conference Call Today at 8:30
a.m. ET / 7:30 a.m. CT
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, and Anixter International Inc. (NYSE: AXE)
(“Anixter”), a leading global distributor of Network & Security
Solutions, Electrical & Electronic Solutions, and Utility Power
Solutions, today announced that their boards of directors have
unanimously approved a definitive merger agreement under which
WESCO will acquire Anixter in a transaction valued at approximately
$4.5 billion. Anixter’s prior agreement to be acquired by Clayton,
Dubilier & Rice, LLC (“CD&R”) has been terminated,
following CD&R’s waiver of its matching rights under the
agreement.
Under the terms of the agreement, each share of Anixter common
stock will be converted into the right to receive $70.00 in cash
(subject to increase as described below), 0.2397 shares of WESCO
common stock and preferred stock consideration valued at $15.89,
based on the value of its liquidation preference. Based on the
closing price of WESCO's common stock on January 10, 2020 and the
liquidation preference of the WESCO preferred stock consideration,
the total consideration represents approximately $100 per Anixter
share, giving effect to the downside protection described below.
Based on transaction structure and the number of shares of WESCO
and Anixter common stock currently outstanding, it is anticipated
that WESCO stockholders will own 84%, and Anixter stockholders 16%,
of the combined company.
Mr. John J. Engel, WESCO's Chairman, President, and Chief
Executive Officer, commented, “The transformational combination of
WESCO and Anixter will create a premier electrical and data
communications distribution and supply chain services company. With
increased scale and complementary capabilities, we will 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 around the globe.
Given the enhanced strategic profile and competitiveness of the
combined company, we are confident we will deliver improved growth
and earnings, and exceptional cash flow generation. We look forward
to welcoming Anixter’s talented associates to the WESCO team as we
embark on this next chapter and create substantial value for our
stockholders, customers, suppliers, and people.”
"Today's announcement is the culmination of a comprehensive
process that showed, from the start, what a strong business the
team at Anixter has built," said Sam Zell, Chairman of the Anixter
board of directors. "The agreement with WESCO is a great result for
our stockholders who will receive significant near-term value and
stand to benefit from the combined company's growth and
prospects."
“This is the result of a very thorough process to determine the
value of our company,” said Bill Galvin, Anixter's President and
Chief Executive Officer. “It's also a recognition of the enormous
value created by our talented people, Anixter's deep industry
relationships, innovative technology solutions, and global reach.
Looking ahead, the combination with WESCO will allow the combined
company to build on our complementary capabilities and create new
ways to serve customers and partners.”
Compelling Strategic and Financial Rationale
- Enhances Scale and Global Position. The combined company
will have pro forma 2019E revenues of approximately $17 billion and
will be a leading electrical and data communications distributor in
North America. With an extensive global reach and increased
international exposure, approximately 12% of revenues will be
generated outside of North America. The increased scale will enable
the combined company to accelerate digitization strategies and
provide a platform for growth in attractive emerging markets.
- Broadens and Diversifies Product and Services Portfolio.
The combined company will have a comprehensive and balanced
portfolio that unites WESCO’s capabilities in industrial,
construction, and utility with Anixter’s expertise in data
communications, security, and wire and cable. Bringing together the
companies’ complementary products, services, technologies, and
solutions is expected to create significant cross-selling
opportunities, strengthening the combined company’s customer value
proposition and supplier relationships.
- Delivers Substantial Synergies. WESCO expects to realize
annualized run-rate cost synergies of over $200 million by the end
of year three through efficiencies in corporate and regional
overhead, including duplicative public company costs, branch and
distribution center optimization, and productivity in procurement,
field operations, and supply chain. In addition, WESCO expects
incremental sales growth opportunities to result by cross-selling
the companies’ complementary product and services offerings to an
expanded customer base and capitalizing on the enhanced
capabilities across both networks.
- Provides Immediate Earnings Accretion and Significant Free
Cash Flow Generation. The combination is expected to be
accretive to WESCO’s earnings in the first full year of ownership
and, with the realization of synergies, substantially accretive
thereafter. WESCO also expects the transaction to generate
significant margin expansion and EPS growth. The combined company
will have strong free cash flow generation, supporting continued
investments in the business and enabling a return of capital to
stockholders in the future.
- Ability to Rapidly De-Lever. At closing, WESCO estimates
that its pro forma leverage on a net debt to EBITDA basis will 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 to 3.5x within 24 months
post-close.
Consideration Terms and Financing
Under the terms of the agreement, each share of Anixter common
stock will be converted into the right to receive $70.00 in cash,
0.2397 shares of WESCO common stock, and preferred stock
consideration consisting of 0.6356 depositary shares, each whole
share representing a fractional interest in a newly created series
of WESCO perpetual preferred stock.
The common stock consideration is subject to downside
protection, such that if the average market value of WESCO common
stock prior to closing is between $47.10 per share and $58.88 per
share, then the cash consideration paid at closing will be
increased commensurately by up to $2.82 per share, such that the
reduction in value of the WESCO common stock is offset by an
increase in the cash consideration within that range. $2.82 per
share will also be paid if the value of WESCO stock is below
$47.10.
The preferred stock consideration consists of 0.6356 depositary
shares, with each whole depositary share representing a 1/1,000th
interest in a share of WESCO Series A cumulative perpetual
preferred stock, with a liquidation preference of $25,000 per
preferred share and a fixed dividend rate calculated based on a
spread of 325 basis points over the prevailing unsecured notes to
be issued to effect the transaction (the dividend rate of the
Series A preferred stock is expected to be approximately 9.25%).
The fixed dividend rate will be subject to reset and the Series A
preferred stock will have a five year non-call feature. WESCO has
agreed to list the depositary shares representing the newly created
series of preferred stock on the New York Stock Exchange, and the
security is expected to receive equity treatment from the rating
agencies. The 0.6356 depositary share to be issued in the merger
per share of Anixter common stock is valued at $15.89 based on the
liquidation preference of the underlying interest in the Series A
preferred stock represented thereby.
Under the terms of the merger agreement, WESCO may elect to
substitute additional cash consideration to reduce the amount of
the preferred stock consideration on a dollar-for-dollar basis
based on the value of the liquidation preference of the preferred
stock consideration.
WESCO has obtained fully committed debt financing from Barclays
and intends to offer a combination of debt, equity, and
equity-content securities between signing and closing to fund the
required cash consideration of the transaction. At closing, WESCO
estimates that its pro forma leverage on a net debt to EBITDA basis
will be approximately 4.5x.
Approvals and Timing to Close
The transaction is subject to Anixter stockholder approval,
receipt of regulatory approval in the United States, Canada, and
certain other foreign jurisdictions, as well as other customary
closing conditions. WESCO and Anixter currently anticipate
completing the transaction during the second or third quarter of
2020.
Entities associated with Sam Zell, Chairman of the Anixter
board, which own approximately 10.8% of the outstanding shares of
Anixter common stock, have entered into a voting agreement with
WESCO, pursuant to which they have agreed, among other things, to
vote their shares of Anixter common stock in favor of the
merger.
Advisors
Barclays is serving as financial advisor to WESCO, and Wachtell,
Lipton, Rosen & Katz is serving as legal advisor.
Centerview Partners LLC is serving as lead financial advisor and
Wells Fargo Securities, LLC is also serving as financial advisor to
Anixter. Sidley Austin LLP is serving as legal advisor.
Conference Call and Webcast Information
WESCO will host a conference call today, at 8:30 a.m. ET (7:30
a.m. CT) to discuss the transaction. The conference call can be
accessed by dialing 1 (877) 443-5356 (U.S.), 1 (855) 669-9657
(Canada), or (412) 902-6614 (International) and asking for the
"WESCO" conference call. A live webcast, along with the related
presentation, will be available on the investor relations section
of WESCO’s website at http://wesco.investorroom.com/.
A replay of the call will be available until January 20, 2020 by
dialing 1 (877) 344-7529 (U.S.), 1 (855) 669-9658 (Canada), or 1
(412) 317-0088 (International) and giving the passcode
10138448.
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.
About Anixter
Anixter International is a leading global distributor of Network
& Security Solutions, Electrical & Electronic Solutions and
Utility Power Solutions. The company helps build, connect, protect,
and power valuable assets and critical infrastructures. From
enterprise networks to industrial MRO supply to video surveillance
applications to electric power distribution, Anixter offers
full-line solutions, and intelligence, that create reliable,
resilient systems that sustain businesses and communities. Through
Anixter’s unmatched global distribution network along with its
supply chain and technical expertise, the company helps lower the
cost, risk and complexity of its customers’ supply chains.
Anixter adds value to the distribution process by providing
approximately 130,000 customers access to 1) innovative supply
chain solutions, 2) nearly 600,000 products and over $1.0 billion
in inventory, 3) 316 warehouses/branch locations with over 9.0
million square feet of space and 4) locations in over 300 cities in
approximately 50 countries. Founded in 1957 and headquartered near
Chicago, Anixter trades on the New York Stock Exchange under the
symbol AXE.
Additional information about Anixter is available at
www.anixter.com.
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended. In connection with the potential transaction, WESCO
International, Inc. (“WESCO”) expects to file a registration
statement on Form S-4 with the U.S. Securities and Exchange
Commission (“SEC”) containing a preliminary prospectus of WESCO
that also constitutes a preliminary proxy statement of Anixter
International Inc. (“Anixter”). After the registration statement is
declared effective Anixter will mail a definitive proxy
statement/prospectus to stockholders of Anixter. This communication
is not a substitute for the proxy statement/prospectus or
registration statement or for any other document that WESCO or
Anixter may file with the SEC and send to Anixter’s stockholders in
connection with the potential transaction. INVESTORS AND SECURITY
HOLDERS OF WESCO AND ANIXTER ARE URGED TO READ THE REGISTRATION
STATEMENT, PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED
WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Investors and security holders will be able to obtain free copies
of the registration statement, proxy statement/prospectus and other
documents filed with the SEC by WESCO or Anixter through the
website maintained by the SEC at http://www.sec.gov. Copies of the
documents filed with the SEC by WESCO will be available free of
charge on WESCO’s website at
http://wesco.investorroom.com/sec-filings and copies of the
documents filed with the SEC by Anixter will be available free of
charge on Anixter’s website at
http://investors.anixter.com/financials/sec-filings.
Participants in the Solicitation
WESCO and Anixter and certain of their respective directors,
certain of their respective executive officers and other members of
management and employees may be considered participants in the
solicitation of proxies from Anixter shareholders with respect to
the potential transaction under the rules of the SEC. Information
about the directors and executive officers of WESCO is set forth in
its Annual Report on Form 10-K for the year ended December 31,
2018, which was filed with the SEC on February 27, 2019, and its
proxy statement for its 2019 annual meeting of stockholders, which
was filed with the SEC on April 15, 2019. Information about the
directors and executive officers of Anixter is set forth in its
Annual Report on Form 10-K for the year ended December 28, 2018,
which was filed with the SEC on February 21, 2019, and its proxy
statement for its 2019 annual meeting of stockholders, which was
filed with the SEC on April 18, 2019. These documents can be
obtained free of charge from the sources indicated above.
Additional information regarding the interests of such participants
in the solicitation of proxies in respect of the potential
transaction will be included in the registration statement and
proxy statement/prospectus and other relevant materials to be filed
with the SEC when they become available.
Cautionary Note Regarding 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. These
statements include, but are not limited to, statements regarding
the expected completion and timing of the proposed transaction,
expected benefits and costs of the proposed transaction, and
management plans relating to the proposed transaction, and
statements that address each company’s expected future business and
financial performance and other statements identified by words such
as “anticipate”, “plan”, “believe”, “estimate”, “intend”, “expect”,
“project”, “will” and similar words, phrases or expressions. These
forward-looking statements are based on current expectations and
beliefs of the management of WESCO and Anixter (as the case may
be), as well as assumptions made by, and information currently
available to, such management, current market trends and market
conditions and involve risks and uncertainties, many of which are
outside of each company’s and each company’s management’s control,
and which may cause actual results to differ materially from those
contained in forward-looking statements. Accordingly, you should
not place undue reliance on such statements.
Those risks, uncertainties and assumptions include the timing,
receipt and terms and conditions of any required governmental and
regulatory approvals of the proposed transaction that could reduce
anticipated benefits or cause the parties to abandon the proposed
transaction, the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement, the possibility that stockholders of Anixter may not
adopt the merger agreement, the risk that the parties may not be
able to satisfy the conditions to the proposed transaction in a
timely manner or at all, risks related to disruption of management
time from ongoing business operations due to the proposed
transaction, the risk that any announcements relating to the
proposed transaction could have adverse effects on the market price
of WESCO’s common stock or Anixter’s common stock, the risk of any
unexpected costs or expenses resulting from the proposed
transaction, the risk of any litigation relating to the proposed
transaction, the risk that the proposed transaction and its
announcement could have an adverse effect on the ability of WESCO
or Anixter to retain customers and retain and hire key personnel
and maintain relationships with their suppliers, customers and
other business relationships and on their operating results and
businesses generally, the risk the pending proposed transaction
could distract management of both entities and they will incur
substantial costs, the risk that problems may arise in successfully
integrating the businesses of the companies, which may result in
the combined company not operating as effectively and efficiently
as expected, the risk that the combined company may be unable to
achieve synergies or other anticipated benefits of the proposed
transaction or it may take longer than expected to achieve those
synergies or benefits and other important factors that could cause
actual results to differ materially from those projected. All such
factors are difficult to predict and are beyond WESCO’s control.
Additional factors that could cause results to differ materially
from those described above can be found in WESCO’s most recent
Annual Report on Form 10-K, as it may be updated from time to time
by quarterly reports on Form 10-Q and current reports on Form 8-K
all of which are available on WESCO’s website at
http://wesco.investorroom.com/sec-filings and on the SEC’s website
at http://www.sec.gov, and in Anixter’s most recent Annual Report
on Form 10-K, as it may be updated from time to time by quarterly
reports on Form 10-Q and current reports on Form 8-K all of which
are available on Anixter’s website at
http://investors.anixter.com/financials/sec-filings and on the
SEC’s website at http://www.sec.gov.
Forward-looking statements speak only as of the date of this
communication. Neither WESCO nor Anixter undertake any intent or
obligation to publicly update or revise any of the estimates and
other forward-looking statements made in this announcement, whether
as a result of new information, future events or otherwise, except
as required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200113005334/en/
WESCO: For further information: Will Ruthrauff, Director,
Investor Relations and Corporate Communications, (412) 454-4220
Joele Frank, Wilkinson Brimmer Katcher: Ed Trissel / Adam
Pollack, (212) 355-4449
Innisfree M&A Incorporated, Scott Winter / Jonathan
Salzberger, (212) 750-5833
Anixter: Ted Dosch Executive Vice President and CFO (224)
521-4281 ted.dosch@anixter.com
Kevin Burns Senior Vice President - Investor Relations &
Treasurer (224) 521-8258 kevin.burns@anixter.com
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