Romolo Tavani - Fotolia
Tech Data has announced plans to acquire its fellow global distributor Avnet Technology Services in a cash and share deal valued at $2.6bn.
The deal would give Tech Data a business that spanned the globe, operating in 35 countries, delivering a wide range of technologies and services.
The combination of the two disties will also change the balance of the Tech Data business with it shifting from the current 61% coming from Europe and 39% from the US to 53% and 44% with Asia Pacific also making a 3%.
On a pro forma basis, Tech Data's revenues for the fiscal year ended 31 July would have increased from $26 bn to approximately $35bn, with the product mix changing as more turnover from higher-margin data centre offerngs fed through to increase the levels from 29 to 45%. Non-GAAP operating income for the most recent fiscal year would also have doubled.
The distributor is also expecting the acquisition to have a fairly swift impact on the bottom line with Tech Data realising $200 million in present value of tax benefits plus an expected $100m in cost savings within two years of the deal closing.
"We are excited to announce this transformative transaction, which creates a premier global IT distributor with the most diverse end-to-end solutions from the data center to the living room," said Bob Dutkowsky, chief executive officer of Tech Data.
What does it mean for resellers?
Tech Data has been quick to provide the channel with some guidance around the acquisition, explaining what it will mean for resellers:
"While we believe there will be many reasons for our customers to be excited about this combination and the value that Tech Data will be able to provide as a result, it is important to emphasize that until the transaction closes, Tech Data will continue to operate as a separate, independent company and will work with customers as usual," the firm stated.
"There will be no changes to customer contracts as a result of the transaction. Following the close, as a result of the broader offering and capabilities created through this transaction, Tech Data will be even better positioned to capture opportunities in next-generation technologies and deliver differentiated value to our customers and vendor partners. Until the closing, however, Tech Data will continue to operate as a separate, independent company and will work with customers as usual," it added.
He added that ATS would complement its existing operations in Europe as well as giving the firm it's first foothold in Asia Pacific.
"We believe the strategic and financial benefits resulting from this transformative combination are compelling for both our company and our stakeholders," he said.
In response, Patrick Zammit, president of the Technology Solutions business at Avnet, said that there were some advantages to becoming part of a larger organisation.
"Industry standardization, innovation and converging technologies have transformed our industry. The broader portfolio created through this combination will enable both businesses to better capitalize on these trends, while also providing new opportunities for Technology Solutions to optimize and expand its offering, as well as unlock value in ways we could not historically," he said.
The deal is not expected to close until the first half of next year, but the offer of $2.4bn in cash and approximately 2.785m shares of Tech Data has been given the approval fromk directors of both companies.