Avnet To Acquire Bell Microproducts

Avnet on Monday confirmed it would acquire Bell Microproducts, marking the largest acquisition by revenue in Avnet's history and giving the distributor a major boost to not only its storage and data center profile but also its operations on three continents.

Avnet is acquiring Bell Micro in an all-cash merger for $7 per share, giving the overall transaction an equity value of $252 million. The transaction value is approximately $594 million, and sees Avnet assuming a net debt position for Bell Micro of $342 million as of Dec. 31, 2009. Avnet expects the acquisition to close in 60 to 120 days, according to a statement.

According to Avnet, the acquisition will increase its total global revenue by $3 billion. All of Bell Micro's two-tier distribution operations will be absorbed into Avnet Technology Solutions and Avnet Electronics Marketing, the distributor's two main distribution arms.

Bell Micro's single-tier reseller business, represented by its Total Tec Systems and ProSys Information Systems divisions, will remain a stand-alone unit, reporting to Avnet COO Rick Hamada, according to a press release. Avnet said it will explore "strategic alternatives" for that business.

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Roy Vallee, Avnet chairman and CEO, noted on an early Monday conference call that Bell Micro's assets will expand Avnet's presence on three continents. The breakdown of Bell Micro's current distribution business is 42 percent North America, 41 percent Europe and 17 percent Latin America, Vallee noted. The acquisition increases Avnet's viability as a major data center-centric distributor, as well as in embedded computing solutions and hard disk drives, he added.

Vallee said the full integration plan for the two companies had not yet been fully determined. He said Avnet anticipates about $50 million to $60 million in "expense synergies" -- meaning overlap -- but none of that overlap is in the Latin American business or relates to Bell Micro's single-tier reseller businesses.

Avnet anticipates a number in the $20 million to $30 million range for the cost of completing the integration, Vallee suggested.

Having Bell Micro "adds real scale," Vallee said in his remarks on the call. "It provides multiple avenues to profitable growth in several areas."

NEXT: Avnet on Bell Micro Integration, Don Bell's Role

Asked on the conference call if Bell Microproducts co-founder and CEO Don Bell will be staying on and in what capacity, Vallee said "absolutely" and said that he and Bell were still discussing what Bell's role will be.

Bell added on the call that he will be "active for a while, or as long as they want me" and said he "wholeheartedly" supported the move.

Avnet now expects revenue for the March fiscal quarter at its Electronics Marketing Group to be in the range of $2.75 billion to $2.85 billion and the revenue at its Technology Solutions Group to be in the range of $1.70 billion to $1.85 billion. Avnet also now expects consolidated sales to be between $4.45 billion and $4.70 billion, the company stated.

For its second fiscal quarter results, reported on Jan. 28, Avnet reported $103.9 in net income at 68 cents per share, and $4.83 billion in sales. Those results were higher than many Q2 expectations.

Bell Micro in late 2009 said it applied for reinstatement on the Nasdaq and was working to get its stock trading at the $4 per share mark. The company was delisted from the Nasdaq in March 2008 following investigations into its stock option and accounting practices.

At the Raymond James IT Supply Chain Conference in New York in December, CEO Bell indicated that Bell Micro's margins were improving and its expenses were coming down.

Being acquired by Avnet means great news for Bell Micro shareholders, Bell noted Monday.

"This transaction delivers excellent value to our shareholders while providing an enhanced platform from which our employees can continue Bell's heritage of helping suppliers reach our served markets with increasingly complex solutions," Bell said in a prepared statement. "Given the rising demands of global technology markets, the investment required to deliver leading edge technical support and competitive supply chain networks continues to grow. Avnet's financial resources and global infrastructure will allow the Bell organization to deliver industry-leading value to our customers and continue our long history of growth and market share gains."