Avnet Inc. has swooped in to buy Premier Farnell plc for approximately £691 million or $907 billion, which outbids Datwyler Technical Components’ offer by 12.1 percent. This acquisition follows a tough year for the $27.9-billion global technology distributor with the recent resignation of Rick Hamada as CEO and struggling sales growth.
In June, Premier Farnell PLC, a global distributor of semiconductors, connectors, and passive components, agreed to be purchased by the division of Swiss industrial components distributor Dätwyler Group AG for approximately $867 million. This would have created a bigger competitor in the European components distribution industry.
Datwyler’s plan has come to a halt with Avnet’s agreement with the Board of Directors of Premier Farnell on the terms of the all-cash offer of £1.85 per share versus Datwyler’s offer of £1.65 per share. Datwyler has the option to offer a higher price, which, in that case, Avnet has 21 days to match the price, according to Matt Sheerin, managing director, Stifel.
The electronic components industry is undergoing a digital transformation, streamlining the way their customers can consume and access their services online. Newark element14, Premier Farnell’s operating brand in North America, for example, boasts an online community that gives buyers and engineers access to technical information, tools and a design center, providing support from design to MRO. This acquisition shows that Avnet clearly wants to expand its digital marketplace.
“The deal is the first big acquisition Avnet has announced since 2013, when it acquired component distributor MSC Investoren, and reflects that the distributor is likely taking a fresh look on M&A front with a change in leadership. Although, the purchase price seems high at ~9x forward EBITDA, we believe it is justified given higher value nature of Premier Farnell offerings,” said Sheerin in a report.
“In addition, the acquisition is also a step to counter its competitor Arrow's digital footprint, which has acquired several media companies to bolster its demand creation business,” Sheerin added. “That said, we believe there are still plenty of opportunities outside of N. America to consolidate electronic components business, and we will not be surprised to see more M&A down the line.”
“This acquisition will significantly strengthen Avnet’s digital footprint worldwide. The convergence of Premier Farnell’s innovative online services with Avnet’s world class supply chain will create customer service unparalleled in the industry,” said William Amelio, interim Chief Executive Officer of Avnet, in a statement. “The talented team of people at Premier Farnell will allow Avnet to enhance our customer experience and accelerate our global growth.”
“Premier Farnell will bolster our strategy to provide a differentiated digital experience from product ideation through its lifecycle. Premier Farnell’s customers gain access to an extensive suite of supply chain services allowing them to ramp new products to production volumes. Our customers will be able to do more technical research online through the services provided by Premier Farnell,” said Gerry Fay, President of Avnet’s Electronics Marketing, Worldwide, in a statement. “Bringing these two companies together allows us to capture market share earlier in the design process.”
“In addition to deepening our customer base, this acquisition will enhance our go-to-market strategy as we target the industrial Internet of Things with edge-to-enterprise products and solutions,” Fay stated.