Two IT distribution powerhouses have agreed to combine in a move expected to create the largest distributor of Sun Microsystems' full line of products.
Avnet, of Tempe, Ariz., has agreed to pay $412.5 million in cash for Access Distribution, of Westminster, Colo., a move that will add some $2 billion in revenue to Avnet's $14.25 billion bottom line.
Access Distribution has operated as a subsidiary of General Electric since 1997 when the corporate giant was in the midst of a string of IT channel-related acquisitions. Speculation that GE wanted to divest itself of the business has recurred only a couple of years after the purchase.
Now, Access, which started its life as Access Graphics and made a name for itself as a highly technical distributor of Sun products, becomes part of one of the industry's largest distribution companies.
"It's both a terrific company and a great fit for Avnet," said Roy Vallee, chairman and CEO of Avnet.
Vallee said Avnet identified cultural, strategic and economic reasons for picking up Access. From a culture standpoint, he said Avnet and Access have compatible business ethics standards.
Strategically, Access rounds out Avnet's enterprise server offerings, he said.
"We're the leading provider of IBM and HP enterprise servers. This is literally the third leg of the stool. Sun is the other leading enterprise server vendor that matters, Vallee said.
From the economics standpoint, the acquisition creates significant value for Avnet shareholders, he added.
Avnet, itself known for a value-add approach to distribution, grew up as a mixed-model channel company, with both a distribution company selling to solution providers and reselling arm doing business with end users. A year ago, the company sold its Hewlett-Packard-focused end-user business with the intent of focusing more on distribution. The company has also divested itself of a Cisco Systems-focused end-user unit.
The Access acquisition brings to Avnet some 600 employees worldwide and a product portfolio that is more technical than the technology typically handled by large-scale distributors, requiring a higher level of technical expertise through specialized VARs.
Avnet executives said the acquisition expands its own line card with complementary products and extends its reach to 35 countries. Vallee said Avnet now will have a presence in four countries, all in Europe, where it didn't do business before: Spain, Portugal, France and the Netherlands.
Avnet is creating a separate business unit to maintain Access Distribution's focus on the Sun Microsystems line, said Vallee. It is the same approach that Avnet uses for its HP- and IBM-focused businesses.
"The combined expertise of both organizations will enable us to continue to grow and expand our business and offer tremendous value to the market," said Anna McDermott, president and CEO of Access Distribution.
Avnet's Access purchase is the second high-profile distribution acquisition in the last month or so. On Oct. 5, Avnet rival Arrow Electronics, of Melville, N.Y., said it was acquiring Englewood, Colo.-based Alternative Technology.
More merger-and-acquisition activity is expected in the distribution channel in months to come, as distributors seek to expand geographically and leverage new technologies.
Tech Data, of Clearwater, Fla., for one, will be eyeing acquisitions as a part of its growth strategy, CEO Bob Dutkowsky told The Channel Insider.
"There are lots of opportunities out there for the largest players to strengthen their businesses via acquisitions," said Dutkowsky. "I think you'll see us become more acquisitive."
Vallee said the reason large distributors are stepping up their acquisition activities is because they are getting a higher return on investments than ever before and, as a result, their cash flow has improved. He said Avnet will be looking at further acquisitions in the future.
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