Wesco International is acquiring Anixter International for $4.5 billion, beating out private equity firm Clayton, Dubilier & Rice, LLC (CD&R) in a multi-week bidding war for the distributor.
This is M&A Deal Number 43 that ChannelE2E has covered in 2020. See the complete M&A deal list here.
Wesco's distribution expertise includes industrial, construction, and utility services. Anixter’s expertise involves data communications, security, wire and cable. The combined distributor will have pro forma 2019 estimated revenues of approximately $17 billion, and will be a leading electrical and data communications distributor in North America, the companies say.
Wesco, Anixter Merger: Bidding War and Layoffs?
The bidding war for Anixter started in October 2019, when CD&R bid $3.8 billion for the distribution business. The deal included a 40-day "go shop" period, which allowed Anixter to solicit better buyout offers for the distributor. From there, Wesco emerged as another potential buyer. The bidding war went back and forth -- gradually climbing to $3.9, $4.0, $4.3 and now the final $4.5 billion price tag.
It sounds like the deal will include some job cuts and layoffs. Indeed, Wesco expects to cut costs at a $200 million annual run-rate 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."
Wesco Acquires Anixter: Executive Perspectives
Commenting on the Anixter acquisition, Wesco CEO John J. Engel said:
"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.”
Added Anixter Chairman Sam Zell:
"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. 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."
Concluded Anixter CEO Bill Galvin:
“This is the result of a very thorough process to determine the value of our company. 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.”
Wesco and Anixter expect the deal to be completed by the second or third quarter of 2020.
Distributor Mergers and Acquisitions: Deals and Companies to Watch
M&A activity in the IT distribution market has been steady, and multiple bidders occasionally emerge to push up buyout prices.
Recent deals include Apollo Global Management’s $6 billion buyout of Tech Data, which is expected to close in the first half of 2020. Warren Buffett’s Berkshire Hathaway also bid for Tech Data, which forced Apollo to sweeten the offer for the distributor.
Additional distributors may be up for sale. Among the potential targets private equity firms have been watching: HNA Group’s Ingram Micro. Although Ingram Micro’s business has been strong, parent HNA Group has been seeking to sell some assets to strengthen its balance sheet, multiple reports suggested throughout 2019.
