Avnet Technology Solutions (Australia) will acquire itX (ASX:ITX), in an all cash merger valued at $77.5 million through a scheme of arrangement. The deal doubles Avnet's presence in Australia.
The wholly-owned subsidiary of Avnet Inc, has entered into a definitive agreement to acquire all of the outstanding shares of itX. The acquisition is subject to the approval of itX’s shareholders, Australian court approval and other customary conditions for a transaction of this type.
The itX Board of Directors has recommended that itX shareholders vote in favour of the scheme in the absence of a superior proposal and subject to receipt of a favourable independent expert's report.
itX has reserved the right to declare and pay to its shareholders a special dividend of up to $10 million (in addition to its normal full year dividend) subject to certain conditions. If the special dividend is declared and paid, the cash consideration for the merger will be reduced accordingly.
"This acquisition is another step in our strategic expansion in the Asia-Pacific region and, in particular, increases our scale and scope in the Australian market,” Avnet Technology Solutions, Global, president Phil Gallagher, said.
“The itX business adds complementary suppliers and business partners, while doubling Avnet Technology Solutions’ presence in Australia. With our broad global supplier relationships, combined with the skills and talents of the itX team, this acquisition will also help to continue to accelerate our organic growth in the region.”
"The addition of new suppliers, solutions and services from itX, especially their strength in software, complements Avnet’s expertise in the data centre sector and significantly expands the portfolio of solutions we can offer," Avnet Technology Solutions Asia-Pacific president, KP Tang, said. "The combination of itX and our current business will enhance our competitive position and increase the value we deliver to our trading partners.”
The transaction, which is expected to close in 120 to 150 days, is expected to be immediately accretive to earnings and supports Avnet’s return on capital goals for acquisitions.
In a 15-page document filed with the Australian Stock Exchange, itX confirmed that had entered into a Scheme Implementation Agreement with Avnet Technology Solutions (Australia).
Under the Scheme, itX shareholders will receive $1.55 in cash for each itX share that they hold on the scheme record date.
The afore-mentioned special divident payment to itX shareholders will be up to $0.20 a share (in addition to its normal full year dividend) subject to certain conditions.
Reasons for the Directors' recommendation were listed as follows:
- The consideration of $1.55 per share represents a premium of:
- 24 per cent to the close price of $1.25 per share on August 5 2010, being the day prior to itX announcing discussions with an interested party regarding a preliminary non-binding indication of interest.
- 34 per cent to the one month volume weighted average price to August 5, 2010 of $1.16 per share
- 43 per cent to the three month volume weighted average price to August 5, 2010 of $1.08 per share
- 40 per cent to the six month volume weighted average price to August 5, 2010 of $1.11 per share
itX distributes software, hardware and services from Oracle, IBM, HP, VMware, Apple, Citrix, Red Hat, and Trend Micro. In addition, itX includes Briell Marketing, a distributor of specialised printers and media for personal identification and security cards, medical and photographic imaging; Sydmed, a distributor of medical devices; and ICO, which provides IT hosting solutions.
The company has about 150 employees and offices in Sydney, Melbourne, Brisbane, Perth, Canberra and Adelaide. For fiscal year ended June 30, 2009, itX generated revenue of about $147 million.
Avnet is one of the largest distributors of electronic components, computer products and embedded technology serving customers in more than 70 countries worldwide.
For the fiscal year ended July 3, 2010, Avnet generated revenue of $19.16 billion.
itX confirmed on August 6 that it was in discussions with a potential party to buy 100 per cent of the ordinary shares in the company.
A previous report speculated that there could be a takeover offer on the way and there would be news in the next week or two.
In a statement to the ASX at that time, the Board confirmed the indication of interest was indicative and non-binding, but it had not yet formed a view on the interest.
“At present there is no certainty that the discussions will lead to an offer or proposal being put to shareholder,” itX said in a statement. “We will provide an update to the market as and when required in accordance with its continuous disclosure obligations.”
itX managing director, Laurie Sellers, reaffirmed at the time there was no certainty that it would develop into anything.
“These things happen from time-to-time, typically they don’t reach the public domain, but in this case there had been speculation in the press,” Sellers said. “There’s no certainty of a proposal. Often these things can take a protracting time before they reach a conclusion.”
itX shares sat at $1.42 on the ASX when trading halted in them.