In an apparent effort to focus more heavily on its components business, Avnet Inc. announced today that it will sell its Technology Solutions business to Tech Data for $2.6 billion in cash and stock. William Amelio, who was named CEO on Sept. 6, said the sale will allow Avnet and Tech Data to focus on their respective core strategies.
“We believe the acquisition of Technology Solutions by Tech Data is the best decision for our employees, customers, suppliers and shareholders. This transaction presents us with the best strategic path for Avnet’s future success and profitability, and puts Technology Solutions in position to achieve breakthrough business results with Tech Data,” Amelio said in a statement. “Moving forward, Avnet will focus its resources and investments on becoming a leader in design chain and supply chain services not only for our current customers and suppliers, but also for new markets. We will drive targeted investments in embedded solutions, Internet of Things (IOT) and critical digital platforms. By investing in these high growth areas, we can expand the breadth of our portfolio and attract new customers worldwide who depend on us to deliver world-class solutions.”
The announcement is the latest in several surprising moves by the global distributor since Amelio was named interim CEO in early July. In late July Avnet moved to out bid Swiss conglomerate Datwyler Group AG for the struggling Premier Farnell plc group of low-volume high-mix component companies. The move would position Avnet in higher-margin catalog and MRO component sales.
The sale of its Technology Solutions business would also further differentiate Avnet from leading competitor Arrow Electronics Inc. Arrow, like Avnet, has traditionally split its business between components and systems sales. In recent years both companies have positioned themselves as “one-stop shops” for electronics OEMs by providing design services, components, systems, and reclamation and recycling businesses.
Avnet’s Technology Solutions operating group is a global IT solutions distributor serving customers and suppliers in more than 80 countries. It provides next generation solutions, marketing, training, resources and services that span the cloud to the data center and encompass the entire IT lifecycle. They work with value-added resellers to make it easier and more affordable to enter and excel in high-growth technology and vertical markets locally and around the world.
“This transformative transaction will position us as 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. “Tech Data has competed with and admired Avnet Technology Solutions for many years. We’re thrilled to start this journey together and are confident that our customers, vendor partners, employees, and shareholders will appreciate and benefit from the value that we will bring to the market. We look forward to welcoming the Technology Solutions team to Tech Data and are excited for the opportunities that this combination creates.”
Additionally, Avnet and Tech Data intend to partner on delivering world class IOT end-to-end solutions to the market.
Upon completion of the transaction, Avnet expects to realize a gain of $3.75 to $4.75 per share. The closing of the transaction, which is subject to customary regulatory approvals, is anticipated to occur in the first or second quarter of calendar 2017.
According to MarketWatch Avnet’s stock surged 2 percent in light premarket trade Monday.