Hi-Tech Data Center

This week, Tech Data Corp has made it known its plans to buy Avnet Inc’s technology solutions unit. The reported $2.6 billion dollar deal should help the company gain a foothold in the growing Asia market in addition to creating a “premier global IT distributor,” according to Tech Data Chief Executive Bob Dutkowsky. The deal actually includes $2.4 billion in cash as well as an approximate $194 million in Tech Data stock.

He says, “As a result of the enhanced value proposition created through this transaction, Tech Data will be even better positioned to capture opportunities in next-generation technologies, deliver differentiated value to our customers and vendor partners, support career development for our employees, and generate strong return for our shareholders.”

Dutkowski also notes, “[We] have competed with and admired Avnet Technology Solutions for many years. We are thrilled to start this journey together and are confident that our customers, vendor partners, employees, and shareholders will appreciate and benefit from the value that we will bring to the market.”

On the other side, Avnet reports its expect to see a gain of $3.75 to $4.75 per share from this deal. Just with the knowledge of this move, Avnet shares rose more than 8 percent in early morning trading—to reach $42.50—cancelling out much of its losses from earlier this year. Similarly, Tech Data shares rose 7.1 percent, to reach $74.25.

Tech Data is known industry wide as a distributor of technology products. This includes technology hardware and software, digital displays, mobile phones, networking equipment, and consumer electronics. Avnet has an operating group—Technology Solutions—which is a distributor of data center and information technology hardware, software, and suppliers. Of course, these make an excellent pair. Avent’s other unit, though, sells semiconductors, interconnect devices, and passive and electromechanical devices and other embedded products to manufacturers of electronic components.

In response to the deal, Tech Data has reported it will significantly add adjusted earnings per share, within the first year, once the deal closes. They also expect to achieve an annual cost savings upwards of $100 million within just the first two years. They detail that they should be able to accomplish this thanks mostly to technology platform efficiencies and through the reduction of duplicative functions and other corporate expenses.

Also, Tech Data has said they expect to realize approximately $200 million in tax benefits.

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