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Avnet Inc. Reports Operating Results (10-Q)

January 28, 2011 | About:
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10qk

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Avnet Inc. (AVT) filed Quarterly Report for the period ended 2011-01-01.

Avnet has a market cap of $5.36 billion; its shares were traded at around $35.24 with a P/E ratio of 10.7 and P/S ratio of 0.3. Hedge Fund Gurus that owns AVT: Richard Pzena of Pzena Investment Management LLC, Paul Tudor Jones of The Tudor Group, Kenneth Fisher of Fisher Asset Management, LLC, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC. Mutual Fund and Other Gurus that owns AVT: Robert Rodriguez of FPA Capital, First Pacific Advisors of First Pacific Advisors, LLC, Arnold Schneider of Schneider Capital Management, Columbia Wanger of Columbia Wanger Asset Management, John Buckingham of Al Frank Asset Management, Inc., NWQ Managers of NWQ Investment Management Co, Pioneer Investments, Mario Gabelli of GAMCO Investors, Jeremy Grantham of GMO LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

During the first quarter of fiscal 2011, the Company acquired three businesses: Bell Microproducts Inc. (Bell), which is described further below; Tallard Technologies, a value-added distributor of IT solutions in Latin America with annualized revenues of approximately $250 million, which is reported as part of the TS Americas region; and Unidux, Inc., (Unidux) an electronics component distributor in Japan with annualized revenues of approximately $370 million, which is reported as part of the EM Asia region.

Unidux, a Japanese publicly traded company, was acquired through a tender offer in which the Company obtained over 95% controlling interest. The non-controlling interest was recorded at fair value but was not material. The acquisition of the non-controlling interest in Unidux was completed during the second quarter of fiscal 2011. As mentioned, Unidux was a publicly traded company which shares were trading below its book value for a period of time. In a tender offer, Avnet offered a purchase price per share for Unidux that was above the prevailing trading price thereby representing a premium to the then recent trading levels. Even though the purchase price was below book value, 95% of the Unidux shareholders tendered their shares. As a result, the Company acquired Unidux for a purchase price of $132,780,000, net of cash acquired, and recognized a gain on bargain purchase of $30,990,000 pre- and after tax and $0.20 per share on a diluted basis. Prior to recognizing the gain, the Company reassessed the assets acquired and liabilities assumed in the acquisition.

During the second quarter of fiscal 2011, the Company acquired three businesses with annualized revenues of approximately $50 million for an aggregate purchase price of $43,525,000, net of cash acquired. Of the three businesses acquired, two are reported as part of the EM Americas region and one is reported as part of the EM Asia region.

On July 6, 2010, subsequent to fiscal year 2010, the Company completed its previously announced acquisition of Bell, a value-added distributor of storage and server products and solutions and computer components products, providing integration and support services to OEMs, VARs, system builders and end users in the US, Canada, EMEA and Latin America. Bell operated both a distribution and single tier reseller business and generated sales of approximately $3.0 billion in calendar 2009, of which 42%, 41% and 17% was generated in North America, EMEA and Latin America, respectively. The consideration for the transaction totaled $255,691,000 which consisted of $7.00 cash per share of Bell common stock, cash payment for Bell equity awards, and cash payments required under existing Bell change of control agreements plus the assumption of $323,321,000 of Bell net debt. Of the debt acquired, Avnet repaid approximately $209,651,000 of debt (including associated fees) immediately after closing. The Company is integrating Bell into both the EM and TS operating groups and expects significant cost saving synergies upon completion of the integration activities, which are anticipated to be completed by the end of fiscal 2011.

The Company acquired accounts receivable which were recorded at the estimated fair value amounts; however, adjustments to acquired amounts were not significant as book value approximated fair value due to the short term nature of accounts receivables. The gross amount of accounts receivable acquired was $381,805,000 and the fair value recorded was $363,589,000, which is expected to be collected.

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