Avnet Grabs Bell Microproducts

Technology distributor Avnet said it agreed to buy Bell Microproducts for $252 million in cash to expand its storage business and its presence in the Latin American market.

Avnet (NYSE: AVT), which had cash and cash equivalents of $894.9 million at the end of its second quarter, will pay Bell Microproducts (NASDAQ: BELM) $7 per share, a premium of 30 percent to Bell’s closing price of $5.38 on Friday on NASDAQ.

Both companies tightened their revenue forecasts for the current quarter, while Avnet also raised its third-quarter earnings outlook.

“Over the past few years, Avnet has been pursuing a strategy to expand into higher-growth emerging markets,” Avnet’s Chief Executive Roy Vallee said on a conference call.

“The Latin America business of Bell will accelerate that strategy by establishing a substantial footprint in a market that is forecast to grow 8.4 percent annually over the next five years.”

North America accounted for 42 percent of Bell’s 2009 revenue, Europe 41 percent and Latin America 17 percent.

Bell’s position in datacenter products and embedded systems creates opportunities for cross selling, CEO Vallee said in a statement.

The company’s position in hard disk drive distribution increases Avnet’s exposure to this product segment, he added.

Last month, Avnet’s CEO had told Reuters that the company is looking to spend a substantial amount on acquisitions this year and is likely to do seven to 10 deals over the course of the year.

The transaction, expected to close in 60 to 120 days, should be immediately accretive to earnings excluding integration and transaction costs, Avnet said in a statement.

The company will assume $342 million of Bell’s debt, it added.

Avnet also said it intends to explore strategic alternatives for Bell’s single-tier reseller business, which sells storage, server and IT infrastructure solutions to end-users in North America.

The company expects cost synergies of $50 million to $60 million, excluding the single-tier reseller business, from the Bell deal.

Avnet sees integration costs of $20 million to $30 million.

Avnet raised its third-quarter earnings outlook to 60 cents to 66 cents a share, excluding items, citing higher revenue and an improved business mix, from its previous forecast of 53 cents to 61 cents a share.

The company also tightened its third-quarter revenue outlook to $4.45 billion to $4.70 billion from its earlier forecast of $4.10 billion to $4.70 billion.

Separately, Bell forecast first-quarter revenue of $795 million to $815 million. It was previously expecting revenue of $780 million to $815 million.

Shares of Avnet rose 7 percent to $30.23 Monday morning on the New York Stock Exchange.

Shares of Bell rose 29 percent to a 30-month high of $6.92 Monday morning on NASDAQ.

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