Avnet Ups the Ante for Premier Farnell

A recent change in leadership and double digit sales drops in its last quarter is not keeping Avnet Inc. from making acquisitions.

The Phoenix, Arizona-based component distributor has agreed to buy Premier Farnell Plc $911 million, edging out a bid by Daetwyler Holding AG of Switzerland. If the deal goes through, it will be the largest acquisition to date for Avnet.

Based in the English city of Leeds, Premier Farnell is the maker of the low cost Raspberry Pi mini-computer, designed to get people online affordably and learn to code. Reuters reported that its board plans to recommend Avnet’s offer and drop support for Daetyler’s bid made last month, although spokesperson told that media outlet it was discussing further proceeding. In the meantime, investors appear to responding favorably to the deal.

Both Premier Farnell and Avnet have had some financial woes of late, noted the Reuters report. Prior to Daetwyler making its offer in mid-June, Premier Farnell’s shares had lost nearly one third of their value since last September as its sales growth slowed in North America and the UK, prompting the company to cut dividend and sell a non-core unit.

Meanwhile, suitor Avnet announced a change in leadership earlier this month, as CEO Rick Hamada stepped down after five years on the job. He was replaced on an interim basis by Bill Amelio while Avnet goes through a selection process to find a more permanent CEO from amongst both internal and external candidates, including Amelio. That decision is expected to made with the next six months.

In conjunction with the significant personnel change, Avnet also announced sales numbers that were less than initially forecast: Sales in the Americas region of company’s semiconductor-focused electronics marketing business are expected to come in $100 million below the prior outlook due to an enterprise resource planning (ERP) implementation in the region, and costs maintain customer deliveries in that same region were also higher.

Revenue for Avnet's technology practice during the third quarter dropped 12.9% to $2.13 billion; in fact, all three business regions experienced double-digital sales drops, and it updated guidance for the quarter that ended July 2, with company-wide earnings for the fourth quarter expected to come in at between 80 and 86 cents per share, which is well below previous guidance of 95 cents to $1.05. 

Despite the less than stellar financial results and some uncertainty as to who will occupy the center seat at the company, Avnet is pushing ahead to capitalize on high growth opportunities. Earlier this week it announced specialized business units to drive software sales in the areas of data center, cloud, security, analytics, mobility and education.

Avnet’s bid for Premier Farnell follows the recent news that ARM Holdings plc has agreed to be bought by Softbank of Japan for about $32.25 billion in an all-cash deal, one that has raised eyebrows with its high valuation. And earlier this week, Analog Devices Inc. announced it will acquire rival Linear Technology Corp. in a cash and stock deal worth about $14.8 billion.

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