Components distributor Abacus has fallen to Avnet in a £42m cash deal after failure to execute on a planned acquisition strategy meant it put itself up for sale last month. Avnet had already been linked to a possible takeover bid after tough trading conditions lead to a rapid slide in Abacus’ stock and profits.
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Abacus chairman Anthony Westropp said that the directors believed that the low share price and high level of borrowings meant that the firm had been forced to ditch its “preferred” buy-and-build strategy.
Avnet CEO Roy Vallee talked up the “exciting opportunities” that Abacus’ business opened up for the Avnet machine.
Vallee brushed off concerns over the timing of the acquisition, which has come in the midst of a terrible week on the markets,saying: “Our financial strength affords us the opportunity to acquire companies like Abacus despite current conditions in the credit markets. Using conservative business case assumptions, we believe that we will achieve our stated return on capital targets following the completion of the integration.”
In August Avnet reported that its buy-and build strategy was paying off as the distributor posted full-year revenues of just under $18bn. Since July 2007 it has bought Magirus’ enterprise infrastructure division, ACAL’s IT solution business unit and Horizon Technology.