Tech Data has entered into a definitive agreement to merge with Synnex Corporation in a US$7.2 billion deal, creating a distribution powerhouse involving two titans of the supply chain.
Rich Hume - currently CEO of Tech Data - will lead the combined company as CEO while Dennis Polk - currently president and CEO of Synnex - will assume the position of executive chair, taking an “active role” in the ongoing strategy and integration of the business.
The new-look supply chain giant will house approximately $57 billion in estimated annual revenues and more than 22,000 employees - amid plans to provide customers and vendors with "expansive reach" across products, services and geographies. Should such projections ring true, the combined business would surpass Ingram Micro as the largest distributor on the planet, by a margin of roughly $10 billion following most recent $47.2 billion figures in 2019.
On paper, the aim of the merger is to create a “diversified global solutions aggregator” capable of serving over 100 countries across the Americas, Europe and Asia Pacific regions, distributing a portfolio of more than 200,000 product and solutions offerings in the process. Operating within a base of 150,000 customers and channel partners, the combined entity will also represent more than 1500 vendors across the world.
“This is transformational for Tech Data, Synnex and the entire technology ecosystem,” Hume said. “Together, we will be able to offer our customers and vendors exceptional reach, efficiency and expertise, redefining the experience and value they receive.”
According to Hume, both parties are expected to benefit from "significant financial strength" to invest in core growth platforms, in addition to establishing best-in-class product offerings in "next generation, high-growth areas" such as cloud, data centres, security, Internet of Things, services, 5G and intelligent edge.
“We could not have reached this milestone without the hard work of our colleagues and we look forward to working together with the Synnex team to seamlessly bring our companies together and to create meaningful value for all our stakeholders," he added.
Founded in 1980, US-based Synnex Corporation - which recently spun off customer experience division Concentrix Corporation - operates as a Fortune 500 company specialising in IT distribution, supply chain logistics and integration services across US, Canada and Japan markets.
The business acquired the Americas divisions of Westcon-Comstor - spanning North America and Latin America - in September 2017, in a deal valued at $800 million. This was in addition to becoming a minority shareholder in the Asia Pacific business of Westcon-Comstor, finalising a ten per cent stake for $30 million during the same transaction.
While loosely connected, US-based Synnex Corporation differs to the Synnex more commonly known in Asia Pacific however, with the American entity operating independently from the Taiwan-headquartered company which serves Australia, New Zealand and Southeast Asia markets.
“This transaction allows for accelerated revenue and earnings growth, an expanded global footprint, and the ability to drive significant operating improvements while continuing to create shareholder value,” Polk said. “We look forward to working with the talented colleagues at Tech Data and expect our combined business will create the opportunity for team members to produce the highest levels of service to our partners.”
Upon completion of the transaction during the second half of 2021 - subject to customary closing conditions - Synnex shareholders will own approximately 55 per cent of the combined entity, with Apollo Funds - parent company of Tech Data - owning approximately 45 per cent.
As part of the process, Apollo Funds will receive 44 million shares of Synnex common stock plus the refinancing of existing Tech Data net debt and redeemable preferred shares of approximately $2.7 billion.
Meanwhile, MiTAC Holdings Corporation and affiliates - which collectively owned approximately 17 per cent of Synnex shares as of 22 January 2021 - have agreed to vote shares in favour of the transaction but until completion, both companies will continue to operate independently. At this stage, the name of the combined entity remains unclear.
“When we acquired Tech Data, we saw the tremendous potential for transformative growth and long-term value creation,” outlined Matt Nord, senior partner of Apollo. “This transaction will accelerate the momentum that was already underway by uniting two outstanding companies for greater scale and financial strength to lead the industry. We are excited to remain a part of the new company's continued success.”
The move comes almost 18 months after Apollo Global Management acquired Tech Data for $6 billion in late 2019, triggering plans to invest approximately $750 million in digital transformation initiatives over the next five years.
As revealed by ARN in mid-2020, investment is expected to underpin Tech Data’s strategy to accelerate innovation to deliver improved experiences and greater agility for businesses across the technology ecosystem.
Key initiatives are currently focused on delivering state-of-the-art automation, platforms and analytics aimed at allowing the distributor to be more agile and responsive to the rapidly evolving needs of channel partners.
The transformation program includes building a hyper-scalable digital business platform and a cloud-based digital marketplace to support Tech Data’s “ambitious” growth plans while serving emerging technology markets and consumption models.
Most recently, Tech Data entered into an agreement to acquire Innovix Distribution in a blockbuster move designed to expand presence across Southeast Asia. Subject to customary closing conditions, Channel Asia revealed that the transaction is expected to close during the third quarter of Tech Data’s fiscal year 2021.
The main motivation behind the acquisition is to “accelerate” Tech Data’s growth in next-generation technologies, with a specific focus on cloud, security and endpoint offerings. This is in addition to expanding business in the key geographies of Singapore, Malaysia and Hong Kong.