Data Center Blockbuster: Insight To Buy Datalink for $258M
Insight Enterprises has agreed to buy Datalink, one of the channel's largest pure-play data center solution providers, for $258 million in a bid to strengthen its data center services offerings around hybrid cloud, converged and hyper-converged infrastructure.
The $5.4 billion Tempe, Ariz.-based company, No. 15 on the CRN Solution Provider 500, said its purchase of the $771 million, 570-person Datalink, No. 45 on the CRN SP 500, will make the company a force to be reckoned with in data center architecture. The deal is expected to close in the first quarter of 2017.
"The data center is at the core of our clients' strategic investments," Ken Lamneck, Insight's CEO, said in a statement. "The acquisition of Datalink is a significant step in strengthening the foundation of our data center practice as we add the expertise and depth of the Datalink team to our portfolio."
Insight said it expects to receive $20 million in cost savings within two years of closing, primarily around corporate efficiencies, duplicative functions and IT system integration. The deal is expected to boost Insight's adjusted earnings per share in 2017 excluding $8 million of one-time transaction and integration expenses.
The acquisition price of $258 million, or $11.25 per Datalink share, represents a 19 premium to Friday's closing share price of $9.43 for Eden Prairie, Minn.-based Datalink. Datalink's stock is up 17 percent in pre-market trading Monday to $11.03 per share, while Insight's stock remains unchanged at $28.16 per share.
Insight said it expects Datalink to contribute $600 million to its top line, according to a filing Monday with the U.S. Securities and Exchange Commission (SEC). Datalink reported $771 million in sales over a 12-month period ending June 30, according to a presentation for Insight investors.
"The strength of Datalink's world-class data center capabilities combined with Insight's scale and breadth of offerings will bolster our ability to deliver solutions for complex business problems across an expanded footprint of clients," Shawn O'Grady, Datalink's chief operating officer, said in a statement.
CEO Paul Lidsky will receive a $200,000 bonus if he serves as a consultant for at least 60 days after the acquisition, while Datalink Controller and Chief Accounting Officer Denise Westenfield will receive a cash retention bonus if she continues her employment through at least May 31, 2017, according to a SEC filing.
"Our enterprise solutions platform, sophisticated offerings, talented professionals and our client base will bring a rich dimension to the Insight organization," Paul Lidsky, Datalink's CEO, said in a statement.
Datalink's roster of 570 employees includes more than 130 field engineers and architects, more than 100 account executives and more than 80 services consultants, according to the Insight investors presentation. Datalink has more than 2,000 clients ranging from mid-size companies to the Fortune 1000.
"Our clients, partners and teammates will experience exciting opportunities for growth and development as a result of this acquisition, Steve Dodenhoff, president of Insight's U.S. business, said in a statement.
Insight intends to finance the transaction through a combination of cash on hand and borrowings under its existing revolving credit facilities, the company said in a statement. The deal is subject to regulatory approval and the approval of Datalink's shareholders.
The deal comes with Insight moving aggressively to increase services sales which were up 12 percent in North America in the most recent quarter thanks in part to the October 2015 acquisition of interactive design company BlueMetal.