Avnet likely to retire all Bell Microproducts debt in connection with acquisition

By Jennifer Lanning Drey

Portland, Ore., March 29 - Avnet, Inc. will "in all likelihood" retire all of Bell Microproducts Inc.'s outstanding debt as quickly as possible after closing on its acquisition of the company, Ray Sadowski, chief financial officer of Avnet, said Monday during a company conference call.

Bell Microproducts has entered into a definitive agreement to be acquired by Avnet in an all-cash merger valued at $594 million, the companies announced Monday.

The transaction value takes into account Avnet's assumption of about $342 million of Bell's net debt, including the par value of its convertible note.

Avnet had nearly $900 million of cash at the end of 2009 and generally requires at least $250 million of cash to run the business at any given point, Sadowski said.

However, he noted that the company also has two virtually untapped credit facilities with "relatively inexpensive" costs of borrowing, making them attractive for partially funding the transaction.

During the question-and-answer portion of the call, the CFO also said there was "always a chance" Avnet would use corporate bonds to fund a portion of the transaction.

"We continually evaluate the markets, and if at the time we close the transaction, market conditions are in favorable shape and it makes sense, we certainly would explore that opportunity," he said.

Also in response to a question, Sadowski noted that Avnet is not looking to make any significant changes to its capital structure and intends to maintain its investment-grade rating.

Transaction benefits

Regarding the strategic rationale behind the transaction, Avnet chief executive officer Roy Vallee said the acquisition would strengthen his company's presence in a few key markets while also helping it to expand into new geographies and product areas.

Current projections support Avnet's return on capital goal for acquisitions of 12.5% upon completion of the integration, he said.

The transaction is expected to be immediately accretive to earnings per share, excluding integration and deal costs.

Vallee also noted during the call that Avnet will explore strategic alternatives for Bell's single-tier reseller business.

The transaction is expected to close in 60 to 120 days.

Avnet is a Phoenix distributor of electronic components, enterprise network and computer equipment and embedded subsystems.

Bell Microproducts is a San Jose, Calif.-based distributor of storage systems, servers, software, computer components and peripherals, as well as maintenance and professional services.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.