The Deal
The deal positions Tech Data as one of the world's most diverse end-to-end global IT distributors with operations in 35 countries and is expected to enhance Tech Data's value-added distribution business in the Americas and Europe while introducing the company to the fast-growing APAC region.
The acquisition is expected to be significantly accretive to Tech Data's non-GAAP earnings per share in the first year after closing. The new TECD will have $35 billion in revenue with distribution in high-value data center accounting for 45 percent of the revenue mix versus 29 percent before.
Tech Data expects to save about $100 million a year within two years after closing, driven by efficiencies related to technology platforms, as well as duplicative functions and corporate expenses.
Tech Data, which expects to realize approximately $200 million in present value of tax benefits, expects the deal to close in the first half of calendar 2017, subject to customary closing conditions and regulatory approvals.
Analyst Take
Analyst Ananda Baruah noted that TECD will recognize material revenue and operational synergies in addition to the $100 million announced yesterday.
"About this we feel very confident, as 1) what TECD has in spades (best-of-breed line card and operational acumen), AVT lacked, and as a result there is material low-hanging fruit once TECD gets its hands on AVT, and 2) the nature of how suppliers determine distribution share positions the new TECD to benefit," Baruah wrote in a note.
In addition, the analyst believes the combined business has potential upside to the current operating margins of about 3 percent from Tech Data's proven operational acumen.
"Simply, TECD has added scale & breadth (with both customers & VARs), & end-to-end solution positioning will resonate with suppliers and generate desire to work incrementally with TECD, which will amplify revenue in a way that can't yet be appreciated," Baruah continued.
At time of writing Tuesday, Avnet was down 2.6 percent at $40.80, while Tech Data was up 3.04 percent at $87.38. Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.