American distributor SYNNEX Corporation and South African group Datatec have unveiled a definitive agreement in which SYNNEX will acquire Datatec's Westcon-Comstor Americas business and become a minority shareholder in Datatec's Westcon EMEA and APAC businesses. "We believe this is a unique opportunity that is transformational to SYNNEX and is aligned to our strategy of positioning the business to where technology is growing. Westcon-Comstor is a recognized leader in the security, UCC and networking space", stated Kevin Murai, President and CEO of SYNNEX Corp. "The Westcon-Comstor brand has been built over time by a very deep and talented team and we are excited to welcome the Americas team to our family."
Jens Montanana, CEO of Datatec, stated: "I'm proud of our team and the business they have built over the past thirty years. The SYNNEX culture is similar to Westcon-Comstor and I'm excited about the opportunity to grow our businesses together on a global scale. We share a common vision and strategic objective in addressing the global complexities and emerging demands facing our partners."
Here are the transaction details and the impact of the acquisition to Consolidated SYNNEX Corporation Financials:
- €460M in stock and €90M in cash at closing
- Up to €185M earn out if certain financial targets are achieved through Feb 2018 – which will allow Datatec to own about 10% of SYNNEX
- €27.7M for 10% ownership of Datatec's Westcon EMEA and APAC businesses (with an option to double that ownership, although no details have been unveiled on how and when). Synnex also gets first refusal on making an offer to acquire it in its entirety if Datatec ever looks to sell the remainder of the business in the future, out of which Datatec wishes to get better value in the future, once the (difficult as usually) SAP implementation in the region is achieved.
- Approximately €106 million of net debt will be assumed and refinanced with the close of the transaction
- Option to pay all cash, based on the average share price at closing
- If stock is issued, the SNX Board of Directors will appoint Jens Montanana to the SYNNEX Board of Directors, subject to compliance with legal and regulatory requirements
"We are pleased to welcome a long-term shareholder like Datatec Ltd. The ownership structure serves us well as it aligns our collective long-term goals", stated Kevin Murai, President and CEO of SYNNEX Corp. "The composition of this transformative acquisition enables SYNNEX to further invest in long-term strategies to grow and diversify our business. Mr. Montanana brings to our board deep practical knowledge in doing business beyond North America."
For its fiscal year end ended February 28, 2017, the Westcon Americas business generated approximately €2B of revenue and approximately €82m in EBITDA. In the first 12 months after close, the Westcon Americas business, excluding integration costs, transaction expenses and intangible amortization, is expected to be mildly accretive to SYNNEX Non-GAAP EPS and then accelerate in year two. The transaction is expected to close in the third calendar quarter of 2017, subject to the satisfaction of regulatory requirements and customary closing conditions. Until the transaction is completed, the companies will continue to operate independently.