SYNNEX Corporation, a technology industry provider of a range of distribution, systems design and integration services headquartered in California with a location in Greenville, and Florida-based Tech Data announced March 22 they have entered into a definitive merger agreement.
The two companies plan to combine in a transaction valued at approximately $7.2 billion, including net debt. Once the merger is completed, the combined company will be worth approximately $57 billion in estimated pro forma annual revenues and have a team of over 22,000 associates.
“We are excited to partner with a world-class industry leader like Tech Data and believe that this combination will benefit all our stakeholders,” said SYNNEX president and CEO Dennis Polk. “This transaction allows for accelerated revenue and earnings growth, an expanded global footprint, and the ability to drive significant operating improvements while continuing to create shareholder value. We look forward to working with the talented colleagues at Tech Data and expect our combined business will create the opportunity for team members to produce the highest levels of service to our partners.”
The merger agreement includes:
- Apollo Funds, a global investment manager that owns Tech Data, will receive an aggregate of 44 million shares of SYNNEX common stock plus the refinancing of existing Tech Data net debt and redeemable preferred shares of approximately $2.7 billion.
- Upon closing of the transaction, SYNNEX shareholders will own approximately 55% of the combined entity, with Apollo Funds owning approximately 45%.
- Rich Hume of Tech Data will lead the combined company as CEO while Dennis Polk of SYNNEX will serve as executive chair of the board of directors and will take an active role in the ongoing strategy and integration of the business.
- The combined company will have an 11-member board, including Hume, with six individuals appointed by SYNNEX. Apollo Funds will have board designation rights based on ownership, initially including four total directors, two of whom will be independent.
In addition to the terms under the merger agreement, the combined company will have a global footprint, which serves more than 100 countries across the Americas, Europe and Asia-Pacific regions, as well as a diversified portfolio of more than 200,000 products and solutions offerings.
The other projected benefits include:
- Non-generally accepted accounting principles diluted earnings per share accretion of more than 25% is expected in year one post-close, with further accretion expected in year two
- Net optimization and synergy benefits of $100 million are expected in the first year after closing, achieving a minimum of $200 million by the end of the second year
- Combines each company’s core growth platforms to establish a differentiated end-to-end solutions portfolio and best-in-class product offerings in some of the largest, highest growth product segments including cloud, data centers, security, Internet of Things, services, 5G and intelligent edge
- Based on the last twelve months pro-forma adjusted earnings before interest, taxes, depreciation and amortization of approximately $1.5 billion and expected combined debt of approximately $4.0 billion at close, debt-to-adjusted EBITDA is expected to be approximately 2.7x at transaction close and is expected to decline to approximately 2x within 12 months
As of January 22, MiTAC Holdings Corporation and its affiliates, which collectively owned approximately 17% of SYNNEX, have agreed to vote their shares in favor of the transaction.
The merger is expected to close in the second half of 2021, subject to the satisfaction of customary closing conditions, including approval by SYNNEX stockholders and regulatory approvals.
Until the transaction is completed, both companies will continue to operate independently.