"The value of an idea lies in the using of it."
-Thomas Edison
January 14,2020
Wesco International and Anixter International Merge for $4.5B
*Financial Information
- Transaction value: $4.5 billion
- EV/Rev: 0.52x
- EV/EBITDA: 10.2x
Transaction Facts
- Today, IT supply chain giants Wesco International, Inc. (NYSE: WCC) and Anixter International Inc. (NYSE: AXE) announced that their boards of directors have approved a definitive merger agreement valued at approximately $4.5 billion.
- Under the terms of the agreement, Anixter will be acquired by Wesco and each share of Anixter common stock will be converted into the right to receive $70.00 in cash, 0.2397 shares of Wesco common stock, and preferred stock consideration consisting of 0.6356 depositary shares.
- It is anticipated that Wesco stockholders will own 84 percent and Anixter stockholders will own 16 percent of the combined company.
- The transaction is subject to Anixter stockholder approval and regulatory approval in the US, Canada, and certain other foreign jurisdictions. It is expected to close during the second or third quarter of 2020.
- Both Anixter and Wesco’s stock dropped slightly after trading hours after news of the merger was announced.
martinwolf Analysis
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Wesco Wins Bidding War: The merger agreement between Anixter and Wesco ends a bidding war with private equity firm CD&R, which first proposed buying Anixter for $3.8 billion in October 2019. The acquisition agreement with CD&R allowed Anixter’s board to solicit a better merger proposal from someone else through Dec. 9th — and thus the bidding war began. Finally, CD&R waived its right to match Wesco’s $4.5 billion offer today. CD&R will be paid a $100 million breakup fee. Also worth noting — in April 2019 CD&R successfully acquired IT solutions integrator Sirius Computer Solutions Inc.
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PE To Strategic: It’s become increasingly less common to see a strategic beat out private equity buyers — and the market seems to be responding accordingly. Shares of Anixter rose after the deal with CD&R was announced in October, while shares of both distributors slightly dropped during trading hours after the deal was announced today. This shows the market’s belief in PE buyers, and its reservations in strategics.
- A Distribution Giant: The combined companies will have 18,600 employees, $17 billion in annual revenue, and over $200 million in anticipated cost reductions over the next three years. Wesco’s CEO John Engel said during the company’s June investor day presentation the company wanted to pursue much larger targets that resulted in “transformation acquisitions.” This deal is just that.
*Financial information from press release and Factset. Revenue and EBITDA multiples are calculated from Anixter September 2019 LTM.
For more information about this transaction, click here to read the press release.
martinwolf was not the advisor in this transaction.
