Avnet Buys Savior For $140 Million

Avnet Inc. last week agreed to buy Savoir Technology Group Inc. for close to $140 million in stock, a deal that doubles Avnet's IBM midrange business and makes it the No. 1 IBM midrange distributor in the world, said company executives.

"The Savoir leadership is the best-in-class in IBM business," said Rick Hamada, president of Hall-Mark Global Solutions North America, a unit of Avnet's Computer Marketing Group (CMG). "We're always looking for smart opportunities that make financial sense, and this is consistent with all our goals."

Savoir shareholders would receive .1196 shares of Avnet common stock for each share of Savoir stock they own, subject to an adjustment based upon the average price of Avnet's stock during a 15-day period.

Acquisition Facts: Au revoir Savoir Savoir shareholders to receive .1196 shares of Avnet for each share of Savior. Savoir's Munro to remain as consultant during integration and possibly longer. To early to tell if jobs will be lost or facilities closed.

The acquisition has been approved by both companies' boards of directors and is subject to regulatory review. It is expected to close within three months.

"Avnet was a distant No. 4 in IBM midrange. They were strong with HP and the [former Digital Equipment Corp.] Alpha line, but clearly they needed more exposure with IBM," said Rob Damron, analyst at Tucker Anthony Cleary Gull Inc., Milwaukee. "[Savoir has] a nice niche with IBM, but that's what it is,a niche. That can best be exploited with a larger company like Avnet," Damron said.

Savoir will be merged into Avnet CMG, with two Savoir segments,OEM systems integration and storage,moving into the Avnet Applied Computing operating group.

"The IBM portion sold to VARs, but Savoir still sells a good portion [about 25 percent of revenue] to OEM account bases," said Josh Napua, president of Avnet Applied Computing. "Those two segments fit nicely in our Applied Computing group."

The deal is an impressive one for Avnet, especially considering the price it paid, said analysts.

"The price is not a shocker, but it's a little surprise because it was about where the stock was trading. There was not a big premium," said Neil Johnson, vice president at The Robinson Humphrey Co. LLC, Atlanta. "Savoir has been a consistent IBM distributor and this brings some strong personality to [Avnet]. Whether it forces other guys toward more consolidation is not clear, but it gives Avnet a leg up and improves its relationship with IBM."

Savoir Chairman and Chief Executive Scott Munro will remain at the company during the integration into Avnet and may stay for the longer term as a consultant, sources said.

It is too early to tell whether any jobs will be lost or facilities closed as a result of the merger, said company executives.

Savoir also developed a wireless two-tier channel under the Avnet CMG umbrella that Avnet will bring under Avnet Convergent Technologies, said Andy Bryant, president of Avnet CMG.

"This is another gem for us," Bryant said. "Our wireless business is about $20 million a year and for Savoir, about $30 million. It has real nice growth potential.

Savoir had $767.2 million in sales in 1999, up from $593.3 million the previous year. Net income was $1.8 million for the year, down from $6.3 million in 1998. Savoir's revenue and earnings were affected by a Y2K lockdown and slumping AS/400 sales in the latter half of 1999, said Munro.

Following the announcement of the sale last Thursday, Avnet shares closed at $64.19, down $1.25, while Savoir shares fell to $7, off $1.25.- CRN

For more on Avnet, go to: www.crn.com/business