The big question in the wake of CDW's $22 million bargain basement acquisition of the North American assets of Micro Warehouse is whether the deal will be contested by angry unsecured creditors.
Channel executives said the primary reason for the low price was that Micro Warehouse was poised to file for Chapter 11 bankruptcy protection. Indeed, the bankruptcy protection filing came just two days after Micro Warehouse announced the CDW deal.
Sources close to the deal said there is a chance that CDW could be forced to shell out more money in the wake of the unsecured creditor backlash. These creditors, including Ingram Micro, did not approve the deal with CDW prior to Micro Warehouse's bankruptcy filing, sources said. What remains unanswered is whether Micro Warehouse shopped the company around or held what in effect would be an "auction" for its assets. "The unsecured creditors are unhappy," said one source. "They are going to pursue whatever means they have available to them. This is going to be a distraction to CDW."
CDW is paying about 3.5 percent of Micro Warehouse's sales, said Brian Alexander, vice president at Raymond James & Associates, an investment banking firm. That figure includes $10 million to $12 million in integration costs, he added. "This is a very, very low price and one that will probably not be duplicated unless there is a similar scenario," Alexander said.
By comparison, Insight purchased Comark in April 2002 for $150 million, about 10 percent of sales.
The bankruptcy filing hit Ingram Micro, Micro Warehouse's largest creditor, the hardest. Ingram Micro last week said it expects to record a third-quarter charge of up to $20 million (about $13 million net of tax) related to accounts receivable in the wake of the Micro Warehouse Chapter 11 filing. Ingram Micro said the per-share impact of the charge could be as much as 9 cents per share for the third quarter ending Sept. 27.
CDW shares soared $6.01, or $496.2 million in market value, the day after the deal was announced Sept. 8.
|
Five Companies That Dropped The Ball This Week For the week ending Feb. 10, CRN looks at five companies that were either asleep at the wheel or just didn't make good decisions. |
|
Five Companies That Came To Win This Week For the week ending Feb. 10, CRN looks at five companies that brought their 'A' game and made moves to beat out competitors |
|
10 Challenges That HP Wants Partners To Tackle Right Now CRN speaks with HP's business unit chiefs to get a sense of where they'd like partners to focus in the coming year, as well as how CEO Meg Whitman is making a difference. |
 More
Slide Shows |
