SYNNEX Corporation and rival Tech Data announced their $7.2 billion merger agreement to create an organization with $57 billion in revenues and a team of over 22,000 associates and colleagues.
“This transaction allows for accelerated revenue and earnings growth, an expanded global footprint, and the ability to drive significant operating improvements,” said Dennis Polk, SYNNEX president and CEO.
Rich Hume, Tech Data CEO, said: “The combined company will also benefit from significant financial strength to invest in its core growth platform as well as next generation cybersecurity, cloud, data, and IoT technologies.”
SYNNEX shareholders will own approximately 55 percent of the combined entity, with Apollo Funds owning approximately 45 percent.
Rich Hume will lead the combined company as CEO. Dennis Polk will be executive chair of the Board of Directors and will take an active role in the ongoing strategy and integration of the business, among other responsibilities.
Tech Data currently is wholly owned by funds managed by affiliates of Apollo Global Management and their co-investors.
The combined company will have a global footprint that serves more than 100 countries across the Americas, Europe and Asia-Pacific regions, and a broad, diversified portfolio of more than 200,000 product and solutions offerings.
Apollo Funds will receive an aggregate of 44 million shares of SYNNEX plus the refinancing of existing Tech Data net debt and redeemable preferred shares of approximately $2.7 billion.
Net optimization and synergy benefits of $100 million are expected in the first year after closing, achieving a minimum of $200 million by the end of the second year.
The combined company will benefit from a strong financial foundation and an investment grade profile. Based on LTM pro-forma adjusted EBITDA of approximately $1.5 billion and expected combined debt of approximately $4.0 billion at close, debt-to-adjusted EBITDA is expected to be approximately 2.7x at transaction close and is expected to decline to approximately 2x within 12 months.
The transaction is expected to close in the second half of calendar year 2021, subject to the satisfaction of customary closing conditions, including approval by SYNNEX stockholders and regulatory approvals.
MiTAC Holdings Corporation and its affiliates, which collectively owned approximately 17 percent of SYNNEX shares as of January 22, 2021, have agreed to vote their shares in favor of the transaction. Until the transaction is completed, the companies will operate independently.
SYNNEX announced revenue of $4.9 billion (+21 percent) during fiscal 2021 first quarter from the prior fiscal first quarter. Operating income was $142 million, compared to $100 million, in the prior fiscal first quarter.
SYNNEX is expecting revenue of $4.7 billion – $5 billion and net income of $82.9 million – $92.9 million during the second quarter.