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Distribution giant Avnet (NYSE:AVT) has
announced a definitive agreement to buy storage-centric distributor Bell
Microproducts (NASDAQ:BELM), marking the
largest acquisition in Avnet’s history and one that will expand the company’s
product offerings and geographies.

Specifically, Avnet will get Bell Micro’s stronghold—its hard disk drive
business—plus a range of other products and geography expansions.

Wall Street liked the deal, sending Avnet shares up by 5 percent and Bell Micro
shares up by 28 percent in morning trading.

Avnet Chairman and CEO Roy Vallee told
analysts and media during a conference call that the products from the two
companies overlapped very little. In addition, Avnet expects to add many of the
employees from Bell Micro.

Avnet said that Bell Micro’s distribution business operations will be
integrated into Avnet’s global operating groups, Avnet Technology Solutions and
Avnet Electronics Marketing.

Bell Micro’s single-tier business in the form of its Total Tec Systems and
ProSys Information Systems businesses will remain stand alone and will report
directly to Avnet COO Rick Hamada for now.
Avnet executives said the company was considering strategic alternatives for
this business.

Avnet said that the acquisition will help it expand into storage and data
centers and strengthen Avnet’s position in Europe and North
America. It will also expand Avnet’s footprint in Latin
America. Bell Micro’s calendar year revenues in 2009 were
approximately $3 billion.

Described as a cash merger, Avnet will pay $7 per share—an equity value of $252
million and a transaction value of $594 million, assuming Bell’s
net debt position of $342 million at the end of 2009.  

The combined revenues for both companies for 2009 were nearly $20 billion.

Avnet said the transaction is expected to close in 60 to 120 days, and deliver
at least 12.5 percent return on capital employed (ROCE) post integration and
should be immediately accretive to earnings excluding integration and
transaction costs.

Bell Micro’s founder and CEO Don Bell said
during a conference call with analysts and the media that he supports the deal and
plans to stay on with the company and that he and Avnet Chairman CEO
Roy Vallee were discussing his role.

In recent years, Bell Micro has been making moves into cloud-based businesses,
and last year it announced a SAAS partnership for disaster recovery.

Avnet also updated its revenue forecast for the March fiscal quarter, saying it
expects the Electronics Marketing Group revenue to be in the range of $2.75
billion to $2.85 billion compared with the prior range of $2.55 billion to
$2.85 billion. It said revenue at the Technology Solutions Group would be in
the range of $1.70 billion to $1.85 billion as compared with the prior range of
$1.55 billion to $1.85 billion. Consolidated sales are expected to be between
$4.45 billion and $4.70 billion.

Due to the higher revenues and an improved business mix, Avnet said it now
expects earnings to be in the range of 60 cents to 66 cents per share, not
including any potential restructuring charges or integration charges related to