The boards of WESCO International Inc. and Anixter International Inc. have agreed to a merger where Pittsburgh-based WESCO will acquire Chicago area-headquartered Anixter in a transaction valued at approximately $4.5 billion. The transaction will deliver greater scale with an enhanced geographic footprint and supply chain services in the industries of network and security, electrical and electronic, and utility power.
Anixter’s prior agreement to be acquired by Clayton, Dubilier & Rice LLC has been terminated, following CD&R’s waiver of its matching rights under the agreement.
WESCO expects the combined platform to provide significant growth and cross-selling opportunities, with an estimated more than $200 million of annual run-rate cost synergies by end of year three, as well as strong combined cash flows, enhanced margins and EPS accretion in first full year of ownership.
The combined company will have pro forma 2019E revenues of approximately $17 billion and be a leading electrical and data communications distributor in North America. Approximately 12 percent of revenues will be generated outside of North America.
Under the agreement, each share of Anixter common stock will be converted into the right to receive $70 in cash, 0.2397 shares of WESCO common stock and preferred stock consideration valued at $15.89, based on the value of its liquidation preference. The total consideration represents approximately $100 per Anixter share.
Based on the transaction structure and the number of shares of WESCO and Anixter common stock currently outstanding, it is anticipated that WESCO stockholders will own 84 percent, and Anixter stockholders 16 percent, of the combined company.
WESCO intends to offer a combination of debt, equity and equity-content securities to fund the transaction. At closing, the company estimates that its pro forma leverage on a net debt to EBITDA basis will be approximately 4.5x. WESCO intends to utilize the strength of the combined company’s cash flows, including significant synergies, to reduce its leverage quickly and ultimately intends to be within its long-term target leverage range of 2x to 3.5x within 24 months post-close.
WESCO and Anixter currently anticipate completing the transaction during the second or third quarter of 2020.
Barclays is serving as financial adviser to WESCO, and Wachtell, Lipton, Rosen & Katz is serving as its legal adviser. Centerview Partners LLC is serving as lead financial advisor and Wells Fargo Securities LLC is also serving as financial adviser to Anixter. Sidley Austin LLP is serving as legal adviser.
