CDW Agrees To Buy Micro Warehouse Assets

CDW acquired the Norwalk, Conn.-based solution provider's U.S. customer base, which accounted for about $900 million in annualized revenue; Canadian operations with about $40 million in sales and about $14 million in inventory; and intellectual capital, trademarks and copyrights.

The companies' boards of directors have approved the transaction, which was valued at $22 million and is expected to be completed Monday. However the Canadian assets are subject to regulatory approvals, according to CDW.

As part of the purchase, Vernon Hills, Ill.-based CDW will not acquire the accounts receivable or the liabilities of Micro Warehouse, but it will receive a 5 percent tee for collecting existing Micro Warehouse receivables. CDW estimates that transition costs, including severance and costs related to the transaction, will be between $10 million and $12 million, and will be incurred primarily during the fourth quarter of 2003.

"Patience pays. We waited for the right opportunity, and we're announcing it today. From the beginning, we've set very clear acquisition criteria, which are [to] expand our customer base, extend our geographic reach or enhance our product capabilities. With this investment, we have achieved all three objectives and delivered value to every CDW stakeholder group," said John Edwardson, CDW's chairman and CEO, in a statement.

About half of Micro Warehouse's U.S. revenue is from corporate customers, 35 percent from the public sector and 15 percent from consumers, according to the company.

About 75 percent of Micro Warehouse's corporate and public sector customers are new to CDW, Edwardson said.

The acquisition makes CDW the nation's leading solution provider of Apple products, he said.

"The loyal customers of Micro Warehouse deserve the best service, and this combination of resources is the best way to provide it to them," said Jerome York, Micro Warehouse CEO, in a statement. "By leveraging CDW's strong financial position, excellent logistics capabilities and world-class sales and sales management team, the potential of the acquired U.S. and Canadian assets of Micro Warehouse will be unlocked."

The companies should be integrated by the end of the year, Edwardson said.

"Our shared priority over the next several weeks will be making the transition period between now and year-end as smooth and seamless for Micro Warehouse customers as possible," he said.

CDW reported August revenue of $383.4 million, compared with $391.3 million in the year-ago period. August 2002 had one more billing day, so this year's average daily sales were $18.3 million, compared with $17.8 million last year.

"Our sales in August of last year were unusually high due to the exceptional level of Microsoft software we sold in conjunction with the Microsoft Upgrade Advantage program, which concluded in early August 2002," Edwardson said. "Total sales of Microsoft software and Upgrade Advantage were approximately 13 percent of our revenue in August 2002, compared with approximately 7 percent in August 2003."

Shares of CDW were trading at $50.74 Monday morning, down 39 cents, or less than 1 percent.