Synnex Corporation has revealed plans to become a minority shareholder in the Asia Pacific business of Westcon-Comstor, alongside outright acquisitions of the distributor’s Americas business.
Following months of speculation and channel conjecture, the local and regional business of Westcon-Comstor will remain under Datatec ownership, alongside Europe, the Middle East and Africa (EMEA) which also follows the same shareholder agreement.
Specifically, US-based Synnex - which operates independently from the Taiwan-headquartered company operating across Australia and New Zealand (A/NZ) - will pay US$30 million for ten per cent ownership of Datatec's Westcon APAC and EMEA divisions.
Known as Westcon International, the deal also includes an option to acquire another ten per cent within 12 months upon completion of the transaction.
In addition, the distributor will acquire the Americas divisions - spanning North America and Latin America - of Westcon-Comstor for US$800 million.
“This exciting industry-transforming opportunity to partner with a strongly-growing, well respected Fortune 500 corporation makes sense from both a supplier and customer value perspective,” Datatec CEO Jens Montanana said.
“Westcon-Comstor North America will benefit substantially from being part of a bigger business with a much larger addressable market – and so will our shareholders with our stake in Synnex.
“The transaction also realises value for our shareholders as a result of the strategic relationship with Synnex through its shareholding in Westcon International – a business which is yet to benefit from the ERP and BPO transformation programmes currently being implemented.
“Post-transaction, the Westcon-Comstor businesses will work seamlessly together for our vendors and customers globally, enabling us to unlock further potential for Westcon International.”
According to Montanana - who will be appointed to the Synnex board as part of the deal - the Westcon-Comstor group head office and non-operational costs - termed global support costs - will be retained by the Westcon International business.
Across the world, the corporate structure of the wider Westcon-Comstor business is complex, having grown by acquisition over many years.
Consequently, an investor presentation overnight acknowledged that “significant internal reorganisation” is required to ensure the separation of the entities into the two groups - Westcon Americas and Westcon International.
“As well as the legal structure, there are many international agreements with vendors, suppliers and customers which need to be amended,” the report stated.
Sources close to ARN confirmed that it will be a case of "business as usual" for the trans-Tasman operations, with the deal naturally carrying greater impact across the Americas at this stage.
Yet the investment could spell the start of a future acquisition by Synnex for the Westcon International business - spanning APAC and EMEA - although this has not been confirmed by any parties.
Meanwhile, Synnex will take control of both North America and Latin America divisions for US$800 million, bolstering the distributor's footprint across security, unified communications and networking in the process.
The Americas deal comprises of US$500 million in stock and US$100 million in cash at closing, with up to US$200 million earn out if certain financial targets are achieved through until February 2018.
“We believe this is a unique opportunity that is transformational to Synnex and is aligned to our strategy of positioning the business to where technology is growing,” Synnex president and CEO Kevin Murai said.
“Westcon-Comstor is a recognised leader in the security, UCC and networking space. The Westcon-Comstor brand has been built over time by a very deep and talented team and we are excited to welcome the Americas team to our family.”
Labelled by many industry analysts as the most suitable buyer of the value-added distributor, purchasing Westcon-Comstor in its entirety would have filled two gaps for Synnex, providing access to the lucrative Cisco portfolio, alongside a much needed presence in Europe.
Yet as the deal shows, Cisco proved the biggest lure for the multi-national organisation, which currently operates across 26 countries, distributing more than 30,000 technology products to over 20,000 resellers and retail customers.
In representing 44 per cent (US$2.16 billion) of global Westcon sales from its Cisco exclusive Comstor business, Cisco will now help Synnex significantly close a widening market gap in North America, joining Ingram Micro and Tech Data as major distributors of the networking vendor.
The acquisition still leaves Synnex without no footprint in Europe however, with the distributor at the stage deciding to monitor the future potential of US$1.62 billion worth of Westcon-Comstor business in the EMEA region, which was reflective of 33 per cent of the distributor’s overall sales revenue.
Yet Synnex would have inherit a botched SAP rollout, which had been cited as a key reason for lagging sales in the region.
Looking ahead, the Americas transaction is expected to close in the third calendar quarter of 2017, subject to the satisfaction of regulatory requirements and customary closing conditions.
Until the transaction is completed, the companies will continue to operate independently.
“I’m proud of our team and the business they have built over the past thirty years,” Montanana added. “The Synnex culture is similar to Westcon-Comstor and I'm excited about the opportunity to grow our businesses together on a global scale.
“We share a common vision and strategic objective in addressing the global complexities and emerging demands facing our partners.”
Headquartered in California, USA, Synnex Corporation is a Fortune 500 company founded in 1980, specialising in original equipment manufacturers, software publishers and reseller customers.
While the distributor is loosely connected with Synnex Technology International Corporation - which is the parent company of Synnex A/NZ - both operate independently.