Agilysys Sells Distribution Arm to ArrowBy John Hazard | Print
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Agilysys sells its distribution arm to Arrow Electronics, leaving it as one of the largest solution providers in the land and set to triple its practice to $1.5 billion in three years.
Distributor Agilysys announced Jan. 2 that it will sell its distribution business, KeyLink Systems Group, to competitor Arrow Electronics, leaving its solution provider practice, Agilysys Enterprise Solutions Group, as one of the largest VARs in the land.
Agilysys will use the proceeds from the $485 million sale (expected to be about $340 million after taxes) and $95.7 million in cash already in hand to grow, organically and through acquisition, from a $500 million VAR to $1 billion in two years and $1.5 billion in three, executives said. Agilysys expects to increase its financial flexibility and liquidity for the purpose by buying back some 6 million shares, for an expected $100 million.
The purchase solidifies Arrow's position as one of the top distributors of server and storage technology, with the addition of 800 resellers and KeyLink's $1.24 billion in revenue in fiscal year 2006. Arrow claimed in a statement that the acquisition makes it the No. 1 IBM and Hewlett-Packard distributor.
The divestment leaves Agilysys focused on direct sales and poised for growth, a process the company began in 2003 when it sold its electronics component distribution business, IED, Agilysys executives said in a statement.
"Agilysys will have a strong balance sheet," said Arthur Rhein, Agilysys' chairman, president and CEO, "with significant financial flexibility to quickly take advantage of opportunities within the solution provider space that enhance and differentiate its product and services offerings, broaden the customer base, and expand its markets."
Since making the decision in 2002 to focus on solutions, Agilysys has added five solution providers worldwide to its Agilysys Systems Group and driven end-user revenue from $277 million to $469 million. The company said it expects to triple that number in three years.
The transformation leaves the company with a 20 percent profit margin, officials said, which has boosted the stock some 87 percent from $8.93 in January 2003 to $16.74 Jan. 1, 2007.
Agilysys now has major sales and service assets in North America, Hong Kong, China and the United Kingdom.
The company said it intends to continue its focus on enterprise storage and server technologies and solutions for the retail and hospitality industries.