It was anticipated that Synnex was the front runner for the Westcon-Comstor business since the start of the year. And, as of this morning Synnex has Westcon-Comstor’s Americas business, which includes Canada, the U.S. and Latin American operations.
Key to this deal is the Cisco business from Comstor which has always been a missing piece at Synnex.
At the beginning of the year, value-added distributor Westcon-Comstor made public it was up for sale. Westcon-Comstor is owned by $6 billion South African conglomerate Datatec Ltd. Datatec revealed it wanted approximately US$800 million for Westcon-Comstor.
On top of this deal is Synnex agreeing to be a minority shareholder in Datatec’s Westcon EMEA and APAC businesses.
The deal breaks down this way:
- $500 million in stock and $100 million in cash at closing;
- Up to $200 million earn out if certain financial targets are achieved through February of 2018;
- $30 million for 10 per cent ownership of Datatec’s Westcon EMEA and APAC businesses; and
- Approximately $115 million of net debt will be assumed and refinanced with the close of the transaction.
Jens Montanana, the CEO of Datatec, if stock is issued in this deal, will get a board of director’s seat at Synnex.
Montanana said Synnex’ culture is similar to Westcon-Comstor and the opportunity to grow businesses together will be on a global scale.
Synnex CEO Kevin Murai believes this deal is a unique opportunity that is transformational for the distributor. The acquisition is also aligned to the company’s strategy of positioning the business to where technology is growing. Westcon-Comstor is a recognized leader in the security, UCC and networking space.
“The Westcon-Comstor brand has been built over time by a very deep and talented team and we are excited to welcome the Americas team to our family,” Murai added, in a prepared statement.
For its fiscal year end ended February 28, 2017, the Westcon Americas business generated approximately $2.2 billion of revenue and approximately $89 million in EBITDA. In the first 12 months after close, the Westcon Americas business, excluding integration costs, transaction expenses and intangible amortization, is expected to be mildly accretive to Synnex Non-GAAP EPS and then accelerate in year two.
The transaction is expected to close in the third calendar quarter of 2017, subject to the satisfaction of regulatory requirements and customary closing conditions. Until the transaction is completed, the companies will continue to operate independently.
Additionally, while the company is going through the normal quarterly close and reporting process, revenues for the second quarter ended May 31 are now estimated to come in above the high end of our guidance range of $3.575-$3.775 billion and Non-GAAP EPS is estimated to come in above the high end of our guidance range of $1.70 – $1.78. The company will report its Q2 earnings results and hold a conference call on June 22nd.