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Avnet snaps-up Bell

by Scott Bicheno on 30 March 2010, 10:09

Tags: Avnet (NYSE:AVT), Bell Micro

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For whom the Bell tolls

Consolidation in the distribution market has been predicted for some time now, but to date there has been a conspicuous lack of major acquisitions. That all changed yesterday when the world's biggest distie announced it was acquiring smaller rival Bell Micro for just short of $600 million.

Rumours about the acquisition of Bell have abounded ever since it was delisted from the NASDAQ in early 2008 for not keeping its accounts up to the standard the NASDAQ requires. Such a demotion lowered the market value of the company, but also added to the risk for potential acquirers.

It took Bell almost two years to get its house in order, but at the start of this year it was readmitted into the NASDAQ and that seems to have been reassurance enough for Avnet to take the plunge.

"We are very excited about the opportunity to build additional scale and scope in storage and computing solutions as well as increase our presence in the fast-growing Latin America market," said Roy Vallee, Avnet's Chairman and CEO. "Bell's position in datacenter products and embedded systems complements Avnet's current strategies and creates opportunities for cross selling."

Don Bell, founder and CEO of Bell, added: "Avnet's financial resources and global infrastructure will allow the Bell organization to deliver industry-leading value to our customers and continue our long history of growth and market share gains."

Avnet is buying Bell for $7 per share - a premium of around 30 percent on the share price before the announcement - which amounts to $252 million. It's also taking on $342 of debt, taking the total value of the deal to $594 million.

As you can tell from the quotes above, Avnet and Bell are both value-added disties with a lot of overlap. This makes us wonder what kind of scrutiny the deal will get with other distribution giants Ingram and Tech Data putting less emphasis on the value-add. However, the presence of Arrow Electronics in the value-added distribution market should reassure competition regulators.


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