Vallee: Avnet Looking For Product, Geographical Expansion With Bell

Avnet's pending acquisition of Bell Microproducts will give the distributor expanded data center and embedded products product line cards and a wider geographical reach, according to the company's top executive.

Avnet on Monday said it plans to acquire Bell Micro in an all-cash merger for $7 per share, or $252 million, in a deal worth a total of about $594 million including debt.

Roy Vallee, Avnet chairman and CEO, told Channelweb.com that Avnet and Bell Micro have considerably less overlap than might appear at first.

"If you look at geography and at our line cards, there looks like quite a bit of overlap," Vallee said. "But if you look at it at a more granular level, our overlap is not all that great."

For instance, Bell will bring to Avnet a strong presence in the Belgium, Netherlands, and Luxemburg areas to help round out its European business, as well as an established business in Latin America, which Avnet was targeting, Vallee said.

Bell will also help Avnet expand its storage and systems business, Vallee said.

Avnet already has a good embedded hard drive business, but Bell will help expand it to a larger commercial market, Vallee said.

Bell is also bringing a strong data center practice, including the integration of storage and server systems, as well, he said.

One major part of Bell not expected to be embraced by Avnet is Bell's single-tier reseller business, which has mainly consisted of ProSys, an Atlanta, Ga.-based provider of process control engineering services and solutions, and Total Tec Systems, an Edison, N.J.-based solution provider.

Next: Avnet's Commitment To Two-Tier Distribution

Bell was already in the process of combining the two into a single organization with 2009 revenue of $400 million, making it one of the largest resellers in North America, Vallee said.

"But Avnet in North America is committed to two-tier distribution," he said. "So we are looking at strategic alternatives for that business. If we divest it, Avnet would secure a contract to be one of its suppliers, so ProSys would be a customer of ours."

The acquisition came about over the course of many years of discussions between Vallee and Don Bell, co-founder and CEO of Bell Micro.

Vallee said he and Bell have known each other since the early 1970s, and have been chatting on and off for years about the possibility of bringing the two companies together.

However, those chats stopped for a while a few years ago during a period when Bell Micro's 2006 financials were audited. Bell's stock was delisted from the Nasdaq Stock Exchange in March 2008 due to investigations of its stock option and accounting practices that lasted more than three years.

The resolution of the accounting issues finally opened the door for serious talks, Vallee said.

"We felt we couldn't do it in the past," he said. "This time around, things seemed to be right."

Bell would be the biggest acquisition Avnet ever did in terms of revenue acquired, and the biggest in terms of purchase price in the IT business, Vallee said. However, Avnet's acquisition of electronics components distributor Marshall Industries was the largest in terms of purchase price overall, he said.

Avnet's most recent major acquisition happened in late 2006 when it bought Access Distribution, which at the time was one of the two top Sun Microsystems distributors.

Avnet expects to close its Bell acquisition in the next 60 to 120 days once it is approved by Bell's shareholders, Vallee said.

Once that happens, Don Bell will continue to work with Avnet for at least a year, and maybe more, most likely in a consulting role to ensure a smooth integration, Vallee said.

"Bell will not be operating the business," he said. "But we want his help on employee relations, supplier relations, and other strategy decisions."