Two Major Private Equity Investors Trim Stakes In CDW By Nearly $487 Million

Two major CDW investors have trimmed their stakes in the solution provider by nearly $487 million.

Madison Dearborn Partners and Providence Equity Partners reduced their holdings in CDW through a secondary offering, selling off more than 13.24 million shares, according to multiple SEC filings by the company.

The two private equity firms took CDW private in 2007 before returning it to trade publicly in 2013. CDW is No. 6 on the 2015 CRN Solution Provider 500.

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Madison Dearborn Partners sold more than 7.02 million shares for more than $258.44 million, reducing its stake in the Vernon Hills, Ill.-based solution provider to 11.38 percent, down from 15.45 percent.

Providence Equity Partners sold more than 6.21 million shares for more than $228.56 million, reducing its stake in CDW to 10.06 percent, down from 13.66 percent.

Madison Dearborn Partners, Providence Equity Partners and CDW did not respond to requests for comment.

Martin Wolf, founder and president of Walnut Creek, Calif.-based MartinWolf, a global mergers and acquisitions investment adviser focused on service provider business models, says that the unloading of shares "doesn't mean anything" in terms of the performance of CDW and that he expects both private equity firms to gradually sell all of their shares in the solution provider over time.

"It's not because they are lacking in confidence in CDW, because they still own a huge share of it," Wolf told CRN on the phone. "They're not like Warren Buffett, who buys Coca-Cola and holds it forever. These guys have five- to seven-year time horizons with each investment. Otherwise, they're not in compliance with their mandate. The expectation should be that they'll sell most of their stock over a period of time so they can redeploy it.

"CDW is a really well-run company and shareholders continue to be rewarded. I expect [both firms] to eliminate their position entirely over time. Because [CDW] went public, it forces [Madison Dearborn and Providence Equity] to sell it over time."

Even after cashing out their shares for nearly half a billion dollars, both firms remain top-10 stakeholders in CDW.

In the company's most recent earnings call, CDW reported a more than 3 percent rise in revenue for the quarter ending March 31, to $2.75 billion, compared with $2.65 billion in the first quarter of last year.

CDW reported better-than-expected earnings of 56 cents per share, beating the Thomson Reuters Wall Street consensus of 53 cents per share. Profits for the $12 billion solution provider behemoth were up 7.5 percent, to $54.7 million, compared with $50.9 million in the year-ago quarter.

The one black eye for the company in the quarter was its health-care business, CDW's richest public sector market, which saw a 5.2 percent drop in revenue, to $373.6 million from $394.1 million in the year-ago quarter.

CRN recently found that CDW is one of the leading public U.S.-based solution providers with the most cash.

PUBLISHED JUNE 11, 2015